URSABLOG: History Repeating?

These are worrying times in the Middle East, especially for shipping passing through the Straits of Hormuz. Six ships have so far been attacked, one way or the other, and whilst the perpetrators have yet to admit responsibility, the finger is being pointed to either Iranian state actors, or by forces backed, tacitly or otherwise, by them. We in shipping of course are concerned as we worry what will happen to the crew, the ships, the oil prices, the volumes being shipped, the freight rates and already rising costs of insurance.

I suspect, however, reports of increased demand for armed guards or other ‘security consultants’ on tankers passing through the Straits of Hormuz are slightly exaggerated. In a curious article in the Financial Times this week, it was reported that some companies had already deployed an extra 70 mercenaries, sorry, security consultants on ships since the first attacks. In what at first seems to be an advertorial for British armed guard companies, it goes on to point out that:

Guards deployed in the region tend to be unarmed: opening fire on elite state-backed forces is considered unwise, even in self defence, while the rules on carrying firearms vary from country to country in the Middle East. But trained guards can improve the quality of lookouts onboard, providing extra manpower and utilising specialist equipment like night-vision googles, helping sight potential attackers early.

Seems it would be cheaper just buying the goggles, which in fact Patrick Rogers at S-RM, a risk consultancy that advises a number of major shipping companies, seems to agree with:

In the circumstances, improving procedures on board — from monitoring the tanker both in port and at sea, ensuring the crew know what to do in the event of an attack, to dusting off crisis management procedures at corporate level, may have more benefit than putting guards on board.

There is a truism, of course, is that war is good for shipping but I am not convinced. Of course a conflict that increases tonne-mile demand, like an incident in the Suez Canal, or the Malacca Straits for example, would increase freight rates exponentially. But the Straits of Hormuz? We have been here before.

During the ‘tanker wars’ of the 1980s, although a total of 451 ships were attacked, the majority of which were crude or product tankers, it had little or no effect on the market in general. Consider this extract from an article in the US Naval Institute Proceedings written at the time:

….the tanker war in general has yet to significantly curtail Gulf oil exports or substantially increase world oil prices. In part, this reflects both a greater reliance by the Gulf Arab states on overland pipelines, and an ample supply of oil from non-Gulf sources on the world market. It also reflects the fact, however, that only a small portion of Gulf shipping is coming under attack. Thousands of ships transit the Strait of Hormuz each year, and scores can be found in the Gulf's waters on a given day. Somewhere between I% and 2% of these are deemed to have come under attack.

Since then the supply of oil from non-Gulf sources has increased, Iran’s exports have fewer customers than ever, and the fleet itself has grown.

The attacks on the ships came before the Iranians admitted to shooting down an unmanned US drone flying somewhere above the straits of Hormuz earlier this week. The US says it was above international waters, the Iranians say it was above theirs.

President Trump tweeted earlier today:

We were cocked & loaded to retaliate last night on 3 different sights when I asked, how many will die. 150 people, sir, was the answer from a General…10 minutes before the strike I stopped it, not proportionate to shooting down an unmanned drone.

This shows a marked, and welcome, restraint, especially when considering the historical parallels, the most obvious being the Gulf of Tonkin incident in August 1964. President Lyndon Baines Johnson, perhaps the most politically able President in post war times, obtained a carte blanche from Congress to effectively start the Vietnam War in earnest after the USS Maddox was reportedly attacked twice in the space of a couple of days by North Vietnamese gunboats. The first attack happened, the second didn’t, but that didn’t stop the Department of Defense making sure Congress and the public believed that it had. It was not the first time intelligence had been ‘sexed up’ to give government the authority for military action, and it certainly wasn’t the last.

I cannot say definitively whether I believe the Iranians were removing a limpet mine from the tanker Kokuka Courageous or not; the ‘proof’ being presented is far from cast iron. I am also trying to not get myself dragged into the various conspiracy theories that circulate; it doesn’t really matter what I think after all. But the risks of a mistake happening, and things being tipped into a full-blown conflict are more real than ever. This is a real international crisis for the United States, not like the rather cosmetic ones of late.

Whether it is a disproportionate response to an act of aggression or not, the fact that military strikes were ordered and then pulled means that the stakes are suddenly a lot higher. Congress seem less than willing to give anything like a carte blanche to President Trump at this stage. Apart from that nothing is clear. The diplomatic, economic and financial environments are more febrile and volatile than ever.

The ‘tanker wars’ of the 1980s were between Iraq and Iran, and although deadly, were a largely contained, if ultimately pointless war. A military confrontation between the United States and Iran is of a different order of magnitude, and consequence, completely. Following the Gulf of Tonkin incident in 1964 it took almost ten years, and approximately 2,500,000 deaths (of which half were civilian) for the United States to finally extricate themselves from it. These are lessons from history.

But history is a device we use to try and make sense of the past in narrative form, and by that I mean our brains are configured to understand the past as a story. Herodotus, the so-called father of history, knew that and was a great story teller, although perhaps he wasn’t that careful on fact checking. I consider the earliest and most significant history to be that of the Peloponnesian war by Thucydides. In it he says:

The absence of romance in my history will, I fear, detract somewhat from its interest, but if it is judged worthy by those inquirers who desire an exact knowledge of the past as an aid to the understanding of the future, which in the course of human things must resemble if it does not reflect it, I shall be content.

History never repeats itself of course - sometimes it doesn’t even rhyme - so it is limited as a predictor of the future. I have come to the conclusion that whilst drawing parallels from the past may feed my insatiable intellectual vanity the only real help it can give us is to orient ourselves as we observe events and, as Thucydides says, use them as an aid to understanding the future. We don’t need to be 2,500 year old historians to understand that the world has become a much more dangerous place recently; this trend is unlikely to reverse itself any time soon.

To understand the future we should be living in the present to start with so we can react to events as they happen. This is not mindfulness, or other ways to passively navigate our way through our tormented emotional lives. It is something far more important. It means waking up and understanding what is happening around the world in the here and now: things are getting serious and, if history has taught us one thing at least, we should be ready for it to happen and, where possible, take advantage.

Simon Ward

www.ursashipbrokers.com