Iran Threat to Block Hormuz Seen Disrupting Trade in Goods
January 10, 2012, 2:23 AM ESTBy Isaac Arnsdorf
(Updates with Societe Generale report in eighth paragraph.)
Jan. 9 (Bloomberg) -- Iran’s threatened blockade of the Strait of Hormuz may disrupt world trade in goods as companies divert ships from the Persian Gulf to safer regions.
Iran said Dec. 27 it would block oil exports through the strait, a global chokepoint for crude shipments, if sanctions are imposed on its crude cargoes. Such a move could also force companies including Ford Motor Co., BASF SE and Caterpillar Inc. to seek safer routes for transporting items including car parts and chemicals, John Manners-Bell, chief executive officer of Transport Intelligence Ltd., a Wiltshire, England-based logistics consultant, said Jan. 5.
“If for any reason the strait were closed it would have a huge impact on the economy in the Middle East and would cause a systematic restructuring of flows of goods around the world,” Manners-Bell, who used to manage European marketing at United Parcel Service Inc., said by phone. “At the moment, investors are piling into Gulf countries because they’re seen as a good business case for long-term development of the region as a global hub.”
Dubai’s Jebel Ali, the biggest port between Singapore and Rotterdam, handles 11.6 million 20-foot boxloads of goods a year, Manners-Bell said. It sits inside the Persian Gulf, meaning vessels must navigate Hormuz to reach it.
Sharjah, also in the United Arab Emirates, handles three million units and Saudi Arabia’s Dammam takes 1.3 million. Half of the cargo proceeds to destinations in the Middle East, India and Africa while vessels also pass through on their way to Europe, he said.
Biggest Chokepoint
The strait, which connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, is the world’s biggest chokepoint for seaborne oil trade, according to the U.S. Energy Department. Almost 17 million barrels a day, or about a fifth of oil traded globally, crossed the waterway last year, the DOE said in a report Dec. 30.
Caterpillar spokesman Jim Dugan declined to comment by e- mail. The Peoria, Illinois-based company is the largest maker of construction equipment. Ludwigshafen, Germany-based BASF SE, the world’s biggest chemical company, would face “little impact” from a possible closing of the strait, spokeswoman Jennifer Moore-Braun said by e-mail Jan. 6. Marcey Evans, a spokeswoman for Dearborn, Michigan-based Ford, said in an e-mail the company was monitoring the situation in Hormuz.
Brent oil for February settlement was little changed at $113.09 a barrel on the London-based ICE Futures Europe exchange by 1:44 p.m. local time. Futures may surge to as much as $200 a barrel for a limited time if Iran blocks the strait, Societe Generale SA said today in a report.
UAE Pipeline
A pipeline in the United Arab Emirates that would bypass the strait has been delayed because of construction difficulties, two people with knowledge of the matter said. The $3.3 billion project won’t be ready until at least April, one of them said.
Iran’s Islamic Revolutionary Guard Corps is planning to hold naval exercises in the Strait of Hormuz and the Persian Gulf, Brigadier General Ahmad Vahidi, the defense minister, was cited as saying by the Fars News Agency last week. The drills would be held in Iran’s southern waters in the “near future,” he told the agency.
The 27 European Union countries moved closer to banning imports of Iranian oil last week after Greece lifted its objections to an embargo that may be adopted Jan. 30. The EU and the U.S. are joined by the United Nations in levying sanctions on Iran over its atomic program, work that the U.S. and allies say may be intended for weapons development. The government in Tehran says its nuclear efforts are for civilian purposes and to generate electricity.
--With assistance from Grant Smith in London and Bruce Stanley, Ayesha Daya and Anthony DiPaola in Dubai. Editors: John Deane, Claudia Carpenter
To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net
To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net
