Why Iran’s Houthis Are Keeping Oil Out Of Red Sea Blockade
While Iran’s Yemeni proxy, the Houthis, attack commercial shipping in the Red Sea, disrupting free flow of goods, oil has so far remained mysteriously immune.
While Iran’s Yemeni proxy, the Houthis, attack commercial shipping in the Red Sea, disrupting free flow of goods, oil has so far remained mysteriously immune.
In its threat to the key shipping corridor, which the Houthis say is to block vessels to Israel in support of Hamas amid the Gaza war, so far, oil has been untouched, Reuters reported on Tuesday.
It is plausible, albeit unsupported thus far, that Iran, concerned about the freedom of its own oil shipments toward China, has taken measures to ensure that tankers remain unharmed in the Red Sea, responsible for 12 percent of the world's oil shipments, including those from Saudi Arabia.
Even in Tehran, Iran’s leaders know how ‘sacred’ oil is and to push the world’s leaders into conflict over its shipment, may be a step too far amid an escalating proxy war.
December’s oil and fuel tanker traffic in the Red Sea was stable, even though many container ships have rerouted due to Houthi attacks, according to Reuters data.
But it seems Iran may be capitalizing on the newfound instability. Last week, reports claimed China’s oil trade with Iran has stalled as Tehran withholds shipments and demands higher prices from its top client, tightening cheap supply for the world's biggest crude importer.
The cutback in Iranian oil, which makes up 10% of China's crude imports and hit a record in October, could support global prices and squeeze profits at Chinese refiners.
Independent refineries favor Iranian oil as it’s cheap, and high quality. Iranian Light, the main export grade, trades at a discount of about $13 a barrel.
However, the Houthis’ blockade has driven up shipping costs and insurance premiums, which will have global ramifications, and led to a US-led coalition of more than 20 nations, which are ready to take military action if attacks on global shipping continue.
Some oil companies like BP and Equinor have diverted cargoes to a longer route around Africa but oil continues to flow. "We haven't really seen the interruption to tanker traffic that everyone was expecting," Michelle Wiese Bockmann, a shipping analyst at Lloyd's List, told Reuters.
A daily average of 76 tankers carrying oil and fuel were in the south Red Sea and Gulf of Aden in December, the area close to Yemen that has seen attacks. That was only two fewer than November's average and just three below the average for the first 11 months of 2023, according to data from ship tracking service MariTrace.
Rival tracking service Kpler tracked 236 ships on average daily across all of Red Sea and Gulf of Aden in December, slightly above the 230 daily average in November. The additional cost of sailing around the Cape of Good Hope off Africa rather than via the Red Sea would make voyages to deliver oil less profitable.
According to data from ship analytics firm Marhelm, it costs as much as $85,000 a day to ship oil on Suezmax tankers, which can carry as much as one million barrels. Aframax vessels, which can move 750,000 barrels, cost $75,000 a day.
In a rare attack on oil, last month saw a missile fired by Yemen’s Houthi rebels hit a Norwegian-flagged tanker in the Red Sea off the coast of Yemen near a key maritime choke point.
The assault on the oil and chemical tanker Strinda in the Bab el-Mandeb Strait, was a rare example of oil bearing the brunt of a war which is being waged by Iran’s proxies surrounding Israel’s borders and beyond since October 7’s invasion of Israel by Hamas, killing over 1,200 mostly civilians and taking over 240 hostage.
Consequently, tanker traffic in the south Red Sea region briefly dipped between December 18 and December 22 when the Houthis intensified attacks on vessels, averaging 66 tankers, but movements resumed after, according to MariTrace.
Container ship traffic in the area has fallen more sharply, down 28% in December from November, according to MariTrace. According to LSEG data, several oil majors, refiners and trading houses have continued to use the Red Sea route, perhaps aware of the importance of oil even to the grand puppet master of the Middle East’s proxies.
“Shippers and their customers really want to avoid a schedule disruption. So they are still taking the risk," said Calvin Froedge, founder of Marhelm, speaking to Reuters. He noted that many oil tankers transiting the Red Sea were carrying Russian crude to India, which the Houthis have no interest in attacking.
Other tankers, chartered by trading house Gunvor's unit Clearlake, Indian refiner Bharat Petroleum and Saudi Arabia's Aramco Trading Company, have all navigated the route in recent weeks. Iran’s ally Russia, whose oil supply remains key amidst its own sanctions, also remains India’s largest supplier, and the complexities of disrupting an already fragile relationship does not bode well for Tehran.
Since the second half of December, at least 32 tankers have diverted or transited via the Cape of Good Hope, instead of using the Suez Canal, according to ship tracking service Vortexa.
The tankers that are diverting are mostly those chartered by companies who announced a pause on Red Sea movement, or those operated by US and Israel-linked entities.
For now, Tehran seems to be playing a smart diplomatic game, but how things turn in coming weeks is anyone’s guess as the Houthis continue to recruit tens of thousands of militants in its war on Israel.
Iran's Revolutionary Guards (IRGC) shot down the Ukrainian airliner shortly after it took off from Imam Khomeini International Airport near the capital Tehran on January 8, 2020. All 176 onboard the plane were killed in the incident.
The downing of the plane by two surface-to-air defense missiles, came a few hours after Iran fired missiles at US military bases in Iraq in retaliation for the US drone strike in Baghdad that killed Gen. Qasem Soleimani, commander of IRGC’s extraterritorial Quds Force.
The four countries, announcing their complaint to the International Civil Aviation Organization (ICAO) in Montreal, said Tehran had used “weapons against a civil aircraft in flight in breach of its international legal obligations."
Canada’s Prime Minister Justin Trudeau said the filing was "an important step in our commitment to ensuring that the families of the victims impacted by this tragedy get the justice they deserve."
Iranian authorities for three days claimed technical issues were responsible for the crash. Subsequently and under public and international pressure, Amir-Ali Hajizadeh, the chief of IRGC air operations responsible for airspace security, attributed the downing of the airliner to “human error” of the air defense. The IRGC also alleged that the “risky behavior” of the United States had caused the incident.
Victims’ families chanting “What an agony is this injustice!” at the anniversary ceremony.
Iranian authorities have never explained the reason for not closing the country’s airspace amid such heightened military tensions and allowed flights out of the country’s biggest international airport as usual.
Some of the victims’ families and many Iranians have always alleged that the IRGC intended to use the plane as a human shield on the night of the missile attack on US bases and the downing of the plane was therefore "premeditated”.
A group of victims’ families convened at the site of the crash on Monday to commemorate their loved ones. In their speeches, they condemned the regime’s “fake trial” of those responsible for the tragedy. Some, like Fatemeh Arsalani who lost her son, daughter-in-law, and grandchild fearlessly cursed the Islamic Republic and the Revolutionary Guards.
Manzar Zarrabi who lost four of her loved ones reading the statement of the Association of Families of Flight PS752 Victims at the anniversary ceremony.
A source close to the families told Iran International in October 2020 that the IRGC was using threats of murder and torture to silence those among victims’ families who were contesting the official explanation of "human error" for shooting down the plane.
“Don’t you think you can frighten a person who has nothing to lose with threats of torture and death,” Touran Shamsollahi who lost her daughter-in-law and granddaughter in the crash said. She vowed to stand “to the end” beside her son, Canada-based Hamed Esmaeilion who has made many efforts to bring the Islamic Republic to justice.
The Association of Families of Flight PS752 as well as Canada, Britain, Ukraine, and Sweden had previously brought the case before the principal judicial organ of the United Nations, International Court of Justice (ICI), in the Hague.
Ukraine and Canada which had 63 citizens on the flight have always complained about Iran's uncooperativeness in investigation of the cause of the incident.
Many among the families of the victims were outraged by the light sentencing of those responsible for the tragic crash and refuted the court’s competence to prosecute the crime of downing the airliner.
Iran's judiciary sentenced the unnamed commander of the IRGC’s Tor-M1 surface-to-air missile system that shot down the plane to 13 years of which he would only be required to serve 10 years including the time he has already spent in prison. Nine others were also sentenced to from one to two years.
Mahmoud Alizadeh-Tabatabei, a lawyer who represented the families of several victims, told Didban news website Monday that the unnamed commander was the only one who was imprisoned but has been released on bail because the sentences passed on the defendants have not been finalized.