From The Atlantic Council, August 12:
Iran is draining its leverage in the Strait of Hormuz. Trump’s best move is to let it happen.
Landon Derentz is vice president for energy and infrastructure at the Atlantic Council, and senior director and Morningstar chair for global energy security at its Global Energy Center.
He served as director for energy at the White House during the first Trump administration.
Bottom lines up front
- Iran’s closure of the Strait of Hormuz is painful, but prolonged disruption will likely hurt Tehran’s leverage by encouraging countries to diversify energy supplies.
- Other producers are expanding oil and gas output, and Gulf states are fast-tracking energy infrastructure that bypasses the Strait of Hormuz.
- The Trump administration should seize this opportunity to build a more diversified global energy system, steadily reducing Iran’s ability to use the strait as leverage.
WASHINGTON—At what point does the United States stop treating the Strait of Hormuz as a crisis to manage and start treating it as an opportunity to permanently redraw the global energy map?
For weeks, Iran has benefited from a basic strategic assumption: The Strait of Hormuz is too important to the global economy for the United States and its partners to tolerate its prolonged disruption. Tehran may not be able to defeat the United States militarily, so the thinking goes, but it can impose enough economic pain on Washington and its allies to force concessions at the negotiating table.
That assumption is now being tested. And with each passing day, it is becoming less true.
This does not mean that the economic consequences of Iran’s continued weaponization of the strait are trivial. They are not. Oil inventories have been drawn down sharply, petroleum products remain tight, and energy-importing economies are absorbing significant costs.
But the relevant question for US strategy is not whether the closure of Hormuz is painful. It is. The question is whether that pain is more strategically endurable than the concessions Tehran hopes to extract in return for ending it.
In contrast with the advantage it derives from its nuclear program, Iran’s leverage over the global economy weakens every day it holds the Strait of Hormuz hostage.
In May 1998, India conducted a series of tests of nuclear devices. Pakistan followed weeks later. International condemnation was immediate and sanctions followed, but the fundamental strategic fact could not be reversed. Both countries had demonstrated nuclear-weapons capabilities. Nearly three decades later, both remain nuclear-armed states.This is the uncomfortable reality of nuclear proliferation. Once a state has developed, tested, and integrated a viable nuclear-weapons capability into its national security architecture, eliminating that capability becomes vastly more difficult.
Energy markets operate differently. They adapt. And every day Hormuz remains closed, its importance diminishes.
For half a century, the structure of global energy markets has been moving gradually away from the concentration that defined the oil shocks of the 1970s. The most vivid example is the US shale revolution, which transformed the United States from an increasingly import-dependent energy consumer into the world’s largest producer of oil and natural gas. But the transformation extends well beyond the United States.
Brazil has emerged as a major offshore oil producer. Canadian oil output has expanded alongside new access to Pacific markets. And perhaps nowhere is the change more dramatic than in Guyana, where large offshore discoveries have created an entirely new oil-producing state in less than a decade....
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