On October 12, an unknown assailant attacked an Iranian oil tanker in the Red Sea. Photos from the Iranian government revealed gaping holes in the side of the Sabiti, which authorities believe were caused by a missile attack.
According to president Hassan Rouhani, the attack was “carried out by a government,” and not a terrorist group, though he did not specify which of Iran’s regional antagonists was responsible.
Oil prices jumped for a day before falling back again.
The attack is another in a string of incidents this year involving ocean-going oil tankers, nearly all of them involving Iran in one way or another, and each one shrouded in mystery. So far, the attacks have had little lasting effect on the oil market, though tanker rates have climbed considerably since 2018.
While measuring the total impact of the tit-for-tat exchanges has been difficult, the tanker attacks have been taken as a sign of rising Middle East tension related to the U.S. campaign of “maximum pressure” on the Islamic Republic of Iran.
A sustained campaign on tanker traffic could have immense consequences for the security of the energy shipping lanes
Yet while the immediate impact of these attacks has been relatively minor, a sustained campaign on tanker traffic could have immense consequences for the security of the energy shipping lanes.
The recent spate of violence echoes another chapter of history—the infamous “Tanker War” of the 1980s. Iran and Iraq, two OPEC members and major oil producers, were locked in a bitter, destructive war, one that would eventually claim over a million lives. Both states depended on oil revenues to fund the war effort (though Iraq had the benefit of drawing on loans from Arab states hostile to Iran’s new revolutionary government), and attacks on tankers and oil export facilities became a hallmark of the conflict.
According to the U.S. Naval Institute, Iraq attacked 280 vessels to Iran’s 168, threatening to bring all tanker traffic in the Persian Gulf to a halt and forcing a U.S. intervention through operations “Earnest Will” and “Praying Mantis.”
The “Tanker War” occurred amidst a global oil glut: despite the violence, crude prices fell throughout the 1980s. But the risk to the global oil trade, which depends on large, vulnerable super-tankers, was made eminently clear by the attacks in the Gulf, emphasizing the importance of choke points like the Strait of Hormuz, a narrow waterway through which one-third of all globally-traded oil passes each day.
More recent attacks on global tanker traffic have helped to highlight such issues once again, though in a more opaque, less definable fashion.
In the 1980s, the Iran-Iraq tanker conflict triggered a U.S. military response, with American warships escorting neutral tankers through the Persian Gulf as military operations neutralized Iran’s naval capabilities.
But now, assailants deploy a variety of covers, including drones and regional proxies, to obscure intentions. Technology has made such attacks somewhat easier to carry out, while the region’s labyrinthine politics obscures intentions and capabilities.
Two attacks on oil tankers in June 2019 were blamed on Iran, which has come under enormous pressure from renewed sanctions and an informal U.S.-orchestrated oil embargo. Iran’s oil exports have dropped from 2 million bpd to less than 200,000 bpd this year: thus, the attacks presumably could be a form of Iranian retribution. But Iranian culpability was never completely proven, and oil markets barely registered the violence.
A repeat occurred in September, when the Saudi oil processing facility at Abqaiq suffered a massive attack, cutting Saudi oil production in half. Markets responded with a sudden spike, then fell back down after Saudi reassurances that production would recover quickly.
The October 12 attack on the Sabiti could have been a reprisal for Abqaiq—Iranian authorities initially blamed Saudi Arabia, before walking back their accusations.
Markets have been complacent, to say the least, in the face of such geopolitical risk. But it bears noting that falling prices characterized the 1980s Tanker War, when dozens of tankers were under attack every month. Oil fundamentals—over-supply, rising non-OPEC production, and Saudi spare capacity—drove down prices even as tankers fell under mine and missile attack in the Persian Gulf.
So far, there has been no indication that the United States—still the most powerful military presence in the Middle East—will get involved as it did in the 1980s, though there will be an expanded U.S. presence in Saudi Arabia, with eighteen-hundred American personnel and several fighter squadron dispatched to bolster Saudi defenses.
The Trump Administration remains committed to the “maximum pressure” campaign, but Iran has taken a back-seat to the deteriorating situation in northern Syria, to say nothing of the impeachment inquiry proceeding in Washington D.C. And with oil markets quiescent, there is little political pressure to act. The President has shown himself to be particularly sensitive to any developments which might cause a spike in oil prices—thus, if tensions on the high seas were to translate to pain at the gas pump, a response from the Trump Administration would be more forthcoming.
The attacks this year betray an uneasy reality—that the global energy infrastructure remains vulnerable to attack, particularly from rival regional powers like Saudi Arabia and Iran, and that such attacks can be conducted on a limited scale in opaque fashion, with a high level of uncertainty and an increasing risk of escalation.
So far, that escalation has not occurred—though the U.S. came within inches of attacking Iran directly in June 2019.
With regional tensions flaring up over northern Syria and the U.S. “maximum pressure” campaign against Iran showing no signs of abating, it is almost certain that the attacks will continue—sooner or later, global energy markets are bound to react.