Transcription
This is Democracy Now. Democracynow.org. I'm Amy Goodman with Nurmine Sh.
Global oil and natural gas prices are soaring after Israel bombed a massive natural gas reserve in Iran, the largest in the world. Iran retaliated by twice attacking the world's largest liquid natural gas production facility located in Qatar. Iran also attacked key energy infrastructure in Saudi Arabia, Kuwait, and the United Arab Emirates. At one point today, the price of oil reached $118 a barrel, a 60% jump since the US and Israel launched its war on Iran. In a post online, Trump threatened to blow up the entire South Pars field if Iran continues to target the Qatari facility. Trump also claimed the US "knew nothing" about the Israeli attack on the South Pars gas field. But the Wall Street Journal reports Trump approved the strike to pressure Iran to open up the critical Strait of Hormuz.
About 20% of the world's oil exports flows through the Strait of Hormuz. President Trump has asked other countries to send warships to help force open the strait, but many nations are rejecting the request. We're joined now by Lala Khalili, professor of Gulf Studies at University of Exeter and the author of several books, including her latest, "Extractive Capitalism: How Commodities and Cronyism Drive the Global Economy." She also wrote "Sinews of War and Trade: Shipping and Capitalism in the Arabian Peninsula." Professor Khalili, thanks so much for being with us. Can you start off by talking about the state of the uh Strait of Hormuz right now, its closure? Um, uh, President Trump, according to Reuters, perhaps sending in thousands of troops, what exactly this means, and the Israeli bombing of the South Pars gas field, the largest in the world, President Trump said in a rare rebuke, the US didn't know. Most people are saying that is highly unlikely. That is probably untrue.
So, uh, the uh Strait of Hormuz is one of the most important choke points for oil. A choke point being an area during which if it's uh closed down, you end up getting a major disruption in the flow of global trade. So, uh, the Strait of Hormuz is one. Uh, Suez Canal is another one. The Panama Canal is another one. And there are a number of these different choke points all around the world. Now, what's specific about Hormuz and what's distinctive about it is that it is um the choke point where the the the quantity of oil that goes through is higher than any other commodity that actually flows across the strait. Um, as you just mentioned, about 30% of the global oil uh flows through that. Um, and part of the reason for that is, of course, that the world's biggest oil producers, some of the biggest oil producers, are all sitting around the Persian/Arabian Gulf. So Iran, Iraq, Kuwait, Saudi Arabia um and uh Qatar, Abu Dhabi uh which uh all are huge producers of oil in the first place, and then natural gas in the case of Qatar um and Iran in the second place.
Now, what has been fascinating is that anybody who has one of these apps that you can put on your phone um like Maritime Traffic or Vessel Finder, you can actually take a look at the flow of traffic, the flow of vessel traffic. um ship traffic through these different seas in the world. And if you zoom in on the Strait of Hormuz, what you'll find is that instead of seeing actually a a steady traffic of um little usually pink or green arrows going through which indicate tankers, what you end up seeing are major clusters of ships that are uh bunched up very near ports where oil is produced and usually put on ships. What that indicates is that basically for a number of different reasons, and I'm going to go into that in a minute. Um, the the flow of uh uh ships, the flow of uh ship traffic has basically come to a halt.
Now, the reasons behind this are manifold. Of course, there is number one that Iran is attacking a number of the ships that are going through, and the way that it is attacking them is through the use of very cheap um either drones or um sea mines. And that means that it's basically almost impossible to deal with um this particular threat because the drones are produced so extensively in terms of number and they're so inexpensive that they can basically be replenished even if they are destroyed. Um, also being smaller, they're much harder to target, etc., etc. So there has been a number of drone attacks um uh against uh ships carrying um oil through the um channel, and so of course that scares um a lot of um uh carriers, um a lot of uh tankers.
The second reason, which I actually think is perhaps even more significant, in part because it is actually not something that uh either the US or Iran can control, is that the moment something like this happens, the moment that there is a threat against ships, uh what you end up having is that insurance brokers um primarily situated in London, uh but there are of course some also in the US, China, and uh in Europe, but really the center for provision of maritime insurance is London um at Lloyd's, and uh the ship brokers end up putting a spe a specific war risk premium um on ships um and that go means that going from something like 1% of the cost of the hull, meaning the ship's body, or the cargo, meaning what it's carrying, uh goes to something like um uh 5%, or it goes from one a fraction of 1% to say 5%. And so that means that suddenly um instead of uh paying uh in the hundreds of thousands for insurance for a supertanker, what you're looking at is u millions in insurance, which of course increases the cost of uh the oil that is traveling. So that's the second reason.
The third reason is something that the Houthis noticed when they were blockading the Red Sea in support of the Palestinians when Israel was committing genocide against Palestinians. And that is that sometimes the threat alone suffices in getting the ships to stop going through or indeed to make um declarations that allows for them a degree of protection. Um, so the Houthis, when they had blockaded the sea, had asked that any ships that claimed that they were not touching Israel, meaning they were not delivering to or picking up from Israel, could be allowed to go through the canal. Um, and so it um happened that this automatic identification system that a lot of ships, well, all ships carry, it's called the AIS system. And the AIS system indicates what ship um is in the vicinity of the system, what it's carrying um and what flag it has, meaning which um which authorities it responds responds to. Um, and so, uh now what we're seeing is that apparently Iran has mentioned that any um ship, for example, that is going to China will be let through, or any ship that is not coming from one of these allied states from the U.S. to the U.S. will be um will be allowed through. Of course, there's a lot of variation in what kind of thing they have requested or what is being reported. So, it's a lot harder to see what exactly the AIS systems are being on these ships. And as I said, we are mostly seeing them clustering and waiting in these locations.
Uh, one of the main ones being the port of Fujairah, uh, which is actually not in the Persian Gulf. It is in the Gulf of Oman. Uh, and uh oil from Abu Dhabi, which is on the um which is on the Persian Gulf side, is shipped to Fujairah through a pipeline. So we're seeing a cluster of ships near Fujairah. Iran, of course, also attacked Fujairah port. And then we're seeing a cluster of ships near uh Ras Laffan, uh, which is the main gas production and gas lifting port in Qatar. And the third is, of course, around the oil fields of Saudi Arabia, a little bit further up the Persian Gulf. And so these clusters of ships are waiting there and hoping to be able to at some point uh pick up uh oil to to be carried out, but we're not seeing much of that flow anywhere at all.
Professor Khalili, you mentioned uh that uh there are they are looking for the Iranians uh to to see which vessels in the Strait of Hormuz to what countries they're affiliated, looking at their flags. Chinese vessels have reportedly been permitted to pass through the strait. China imports about 40% of its oil from the Middle East and has been one of the largest buyers of Iranian oil. There are also reports that the Iranians are suggesting they'd consider allowing a small number of oil tankers to pass through the strait if the oil cargo is traded in Chinese yuan rather than US dollars. If you could comment on that.
Um, this is really fascinating because of course we know that the uh fundamental basis of the US imperial order since the end of the Second World War has been on the one hand petroleum and on the other hand the US dollar. Uh, the uh the globe's production and finance worlds are dependent on the petroleum that the US has guaranteed the flow of since the end of the Second World War, and which until the nationalization of oil in the 1970s and '80s, basically controlled something like 60% of the glo the world's oil reserves. After nationalization, that percentage dropped dramatically, but the US dollar continues to be, and the financial channels that the US has crafted continue to be, a very significant uh bolster for the empire. So the fact that Iran is actually looking for alternatives to the dollar um in order to challenge the petrodollar regime, which is, you know, as I said, one of the fundaments of the US empire, is a really interesting and quite clever indication of uh how the Iranians are hoping to influence the crafting of a world post this war, or a new world order post this war, where there is a multipolar financial system, where, for example, the dollar is no longer a single currency that rules the world, and the US is the only channel that controls, or the only power that controls financial channels. Because of course, the US has used this um this inordinate power to strong-arm various states to institute sanctions, to make it difficult for its enemies, for example, to purchase oil, as and of course, to to it has used it to coerce a lot of countries, as we see, for example, in the case of Cuba or Iran um or indeed Russia um to to do its bidding. So the fact that Iran is calling for petro-Yuan to uh become an alternative to petrodollars is actually quite significant, also in indicating uh that the Iranians are well aware of how extensively the US has used its coercive sanction capabilities through its control of the financial channels and through its um mastery of the petrodollar, and are trying to erode that power.
And Professor Khalili, you know, the US is now the world's largest oil producer, but because oil is a globally priced commodity, the price goes up in the US if the world market price goes up. But >> That's right. >> How important do you think this might be in Trump's calculation? Because another consideration, another aspect of this may be that as oil supplies diminish from the Middle East, the US could benefit because it is the world's largest oil producer and the price of its oil will go up and the demand for its oil.
>> Absolutely. What a fantastic question. Because in fact, we have seen that when the uh Russian invasion of Ukraine began and uh the uh Nord Stream uh gas natural gas pipelines to Europe were sabotaged, we now uh there there are now indications that this may have been done at the behest of the US and its Ukrainian allies. But nevertheless, when that sabotage happened, it actually translated into massive gains for US natural gas production. The thing is that there are a number of reasons why oil is not, while the US cannot become the sole oil producer for the whole of the world. One is a question of proximity, for example. The second is the question of capacity that um the US has in order to actually replace, for example, the oil that is produced by Saudi Arabia or by Iran or indeed by Russia. But the third factor, and I think that this is the one that I think we should look out for, is that in uh the last 10 or uh 15 years, China has actually begun generating an alternative set of fuels, um sustainable fuels, um and developing technologies, particularly of uh electric and battery technologies, that will allow for, for example, solar um or wind energy to displace um fossil fuels. And the more that the price of oil goes up, which of course we've seen that happen, as you mentioned earlier, um and in fact, this also translates into major windfalls for US oil um companies. This oil price going up benefits Chevron, it uh benefits Exxon. It doesn't benefit the average US citizen at the petrol stations, at the gas stations, but it does benefit the oil companies. So it definitely does that, does happen. But the higher the price of oil goes up, the the relatively cheaper it becomes to actually have sustainable alternatives, which of course, that means that it benefits China in a major way, since China is way ahead of the rest of the uh world in uh producing these technologies and in producing them cheaply. So the solar panels that are being produced in China are a fraction of the price of solar panels that were being produced something like 15 or 20 years ago. And I think this shift is actually um is is uh a major long-term concern for the oil companies. So in the short term, they're taking all the windfall that they can get. But this again is um the the kind of a post-war order that we will see um will likely also have major implications for the kind of energy people are paying to use or um people are willing to um willing to use.
Actually >> Uh, we just have 20 seconds, but the effect of the bombing of the South Pars facility, the largest gas facility in the world, what it means for Iran, what it means for the world, and President Trump denying the US had anything to do with it, most do not believe.
>> No, absolutely not. There there is no way that Israel would have actually um uh done this without coordination with the United States. And in fact, the channels that deny, for example, that the US uh coordinated or report uh Trump's uh denials are the channels that are often used to feed us the kinds of lies that the administration tells us. But what is quite significant about South Pars, and I know it's a very short time left, so I'm going to be very quick about it, is that the South Pars field is actually shared between Iran and Qatar. The North Dome, which is on the South part of the Persian Gulf, is Qatar's share of this this uh major field, and uh Iran's uh bit is in the northern part of the Persian Gulf. And so the destruction of the infrastructure there will not only have an effect on Iran's ability to uh produce electricity and um uh fuel their uh various uh kinds of industries and/or homes, but it will also have an effect on the infrastructures that are used by the Qataris, and which the Iranians and Qataris have been using in uh in an extraordinary to an extraordinary degree of coordination since the since the fields have been utilized. So this actually also affects Qatar. Uh, the bombing itself also affects Qatar, and I I don't think that this is a calculation that the rather no-nothing Trump administration has taken into account.
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