Amid escalating tensions in West Asia in the wake of US-Israel strikes against Iran, a leading Indian-American maritime executive has voiced concern over the impact on the crucial oil artery of the Strait of Hormuz and implications for global oil prices.
"Shipping is the hardest-hit industry in any such turbulence in the geopolitical situation,” Chairman of maritime company Safesea Group Dr S.V. Anchan told PTI.
“The Strait of Hormuz must not be allowed to be shut down,” Anchan said, calling for urgent action to ensure safe passage of vessels in the area.
Anchan said oil prices are expected to rise on Monday in the wake of the geopolitical developments in the region, but added that prolonged high oil prices will be bad for the economy.
"It’s in no one’s interest globally, including the US,” he said, adding that “blocking the Hormuz is no less than choking the people at large of the region, at a time when even the airspaces are also closed.” There are estimates that already 150 tankers dropped anchor outside the Strait of Hormuz and are not going in, he said.
"It’s in the economic interest as well as in the interest of people of the Arabian Gulf Nations to continue the vessels' operations at ports and offer a safe passage to vessels to trade in and out of the Strait of Hormuz, if need be, with the support from Navy vessels," Anchan said.
The Strait of Hormuz is located between Oman and Iran and connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. It is one of the world's most important oil chokepoints.
The US Energy Information Administration has said that “very few alternative options” exist to move oil out of the strait if it is closed. In 2024, oil flow through the strait averaged 20 million barrels per day or the equivalent of about 20% of global petroleum liquids consumption, it said.
Anchan said the maritime industry is always the first in line to bear the impact of wars and conflicts, especially in a confined region like the Arabian Gulf.
“Having seen many regional wars and cold wars in the past, this war makes it different due to the direct involvement of the US and Israel against Iran, while Iran also unleashed attacks on neighbouring countries,” he said.
The military strikes by the US and Israel against Iran and Tehran’s retaliation on the early morning of February 28 have added several unknown factors for the maritime industry in the current scenario.
“Especially, in the recent past, for USA-owned ships, where anyway to trade in the region was a task due to uncertainties on the AWR (Additional War Risk) insurance coverage,” Anchan said.
Anchan noted that many ship owners have taken a call to avoid the Middle East area and traders are also avoiding chartering vessels until “unknown factors are clear.” He added that if export of Iranian oil is legalised like Venezuela, the “tanker market will be bullish, which will have a positive effect on bulk ships too.” Noting that around 94 per cent of the world's trade takes place across oceans through international shipping, Anchan voiced concern that shipping efforts are hardly being recognised.
“Despite the highly capital-intensive nature of the business, few governments are around to extend a helping hand when this industry is in distress,” he said.
“There is a strange disparity in the treatment shown towards the shipping industry. UN member nations and sovereign countries announce sanctions at the blink of an eye. Such announcements are done without considering the investment an industry has done specially by shipping,” he said, adding that the industry has often been directly targeted by specific maritime sanctions imposed, given its close affiliation to the energy sector.
“As one of the core sectors of international trade, it is forced to navigate carefully through the shoals of multiple international economic and trade transactions,” Anchan said.
Highlighting the complexities involved, he said oil is extracted in one place, refined in another, shipowners who transport are often based and operate from a third location, while banks and financial institutions are located somewhere else, and vessel insurers in yet other places.
Oil tankers then travel through many ports across diverse routes, and the responsible ship owner will have to comply with numerous overlapping maritime checks imposed by multiple jurisdictions.
“Any breach in sanctions regimes can have huge consequences that include legal disputes/liabilities, controversies, reputational risks, delays and huge fines as well as vessel detainment. Also, most insurance policies now contain sanctions-related exclusion clauses that protect them but impugn ship owners,” he said.
Anchan called for governments and bodies like the UN to take into account the views of sections of the business community that are likely to suffer consequences of sanctions as "collateral damage" through no fault of theirs.
"For this, some form of recognised business body should be formed either as part of the Global Business Compact or any other dispensation and allowed to provide their input to the UN, or even be part of the sanctions panel. If businesses are compensated for their losses due to sanctions, then such sanctions can become more watertight. Sanctions should be unbiased and not have differentiated and unjustified effects on third parties," he said.
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