Center for a New American Security

Chatham House published a new study last week examining the implications of maritime choke points for the global energy market. The study, Maritime Choke Points and the Global Energy System: Charting a Way Forward, is timely considering tensions in the Persian Gulf where Iran has hinted at the possibility of closing the Strait of Hormuz in response to recent threats (economic and military) against its nuclear program.

The study generally provides a great overview of the challenges associated with seaborne oil transportation through several vulnerable straits and canals. For those interested in understanding the nature of China’s Strait of Malacca Dilemma, the international waterway through which it receives approximately 65 percent of its oil imports, the report offers some useful insights. In particular, the authors make an important distinction between the Straits of Hormuz and Malacca, noting that, “Whereas there are no alternative maritime routes to the Strait of Hormuz for oil exports from the Persian Gulf, shipments through the Straits of Malacca and Singapore could be re-routed, though at additional cost, through other waterways such as the Lombok Strait.” Such a distinction may seem insignificant, but it could have an effect on China’s strategic calculus over what role it might decide to play in helping keep the Strait of Hormuz open in case of a closure, including, perhaps, by supporting UN Security Council resolutions or other policies that may seem anathema to Beijing.

The report also reinforces the national security rationale behind ratifying the Law of the Sea Convention (UNCLOS). According to the authors, “The UNCLOS bargain accepted twelve nautical miles as the maximum extent of a state’s territorial sea but, in order to ensure freedom of navigation through key international straits, UNCLOS established a regime of ‘transit passage’ applicable to ‘straits used for international navigation’.” What is more, the authors note that “In signing UNCLOS in December 1982, Iran claimed that the benefits of UNCLOS, such as ‘transit passage’, did not apply to non-signatory states.”

Oil prices rose slightly on Wednesday due to increased tensions between the United States and Iran. The price of oil jumped more than $4 a barrel after the Iranian military warned on Tuesday that the U.S. aircraft carrier USS John C. Stennis not return to the Persian Gulf. The U.S. military dismissed the Iranian threat, stating that the United States will remain committed to ensuring the freedom of access and navigation of the Strait of Hormuz, an international waterway recognized by longstanding maritime norms, as well as the UN Convention on the Law of the Sea. “The deployment of U.S. military assets in the Persian Gulf will continue as it has for decades," said George Little, the Pentagon’s press secretary.  

Despite what appears to many as saber-rattling, energy analysts have cautioned that increased tensions between the United States and Iran could have serious implications on the global price of oil. For example, if Iran were to actually blockade the Strait of Hormuz, through which nearly 20 percent of the world’s oil is shipped, the price of oil could climb by 50 percent in just a few days. “Energy analysts say even a partial blockage of the Strait of Hormuz could raise the world price of oil within days by $50 a barrel or more, and that would quickly push the price of a gallon of regular gasoline to well over $4 a gallon,” The New York Times reported on Wednesday.

On Monday, The New York Times reported that Iran began successfully operating its first nuclear power plant. “The $1 billion, 1,000-megawatt Bushehr plant will be formally inaugurated Sept. 12, by which time it will be operating at 40 percent capacity,” the report said. According to the Times, “Experts say starting up the Bushehr plant will not bring Iran any closer to building a nuclear bomb, because Russia will supply the enriched uranium for the reactor and repatriate spent fuel that could be reprocessed into weapons-grade plutonium.”

However, on Saturday, The New York Times reported that international nuclear inspectors found that Iran has started operating “a new generation of equipment that over time should give it the capability to produce nuclear fuel much faster.” Understandably, the International Atomic Energy Agency (IAEA) report on Iran’s new equipment has made onlookers nervous: “What worries us is not what the Iranians show the inspectors, but what it tells us about what they know how to produce,” an American intelligence official told The New York Times.  What is more, “The [international inspectors’] report also warned anew of what the I.A.E.A. called ‘possible military dimensions’ of Iran’s program, including suspected work on a ‘nuclear payload for a missile, about which the agency continues to receive new information,’” according to the Times.

This week will be hot and heavy on Cancun, with CNAS alum Alex Stark reporting from the climate negotiations here on her blog, which we’ll repost here as well. So save for this brief but witty diversion from Mike Luckovich, I’ll stick to the highlights of other natural security news from this weekend.

  Photo: Navy News Service/Tech Sgt. Cohen A. Young USAF

Yesterday The Washington Post reported that US gasoline prices have hit an 8-month low.  The article reports that “the sagging commodity market price for gasoline is good news for American motorists, promising a mild easing in pump prices. It also marks the end of a summer of relative stability for retail gasoline prices, which have fluctuated by about 20 cents per gallon since the beginning of the year and have stayed in an 8-cent range for the past 69 days.”  But the drop in oil prices may ultimately prove to be a bad thing for America’s energy policy, and particularly for the way that DOD shapes its energy strategy.

That’s because the high and volatile price of petroleum serves as a major incentive for DOD to switch to a greater use of alternative fuel sources.  In 2008, according to the US Department of Energy, about 78 percent of DOD’s total fuel use was petroleum. Since DOD is so reliant on petroleum as a fuel source, even small price fluctuations can have major budget effects: for example, in 2008 Defense Secretary Gates said “every time the price of oil goes up by $1 per barrel, it costs us about $130 million, and frankly, my credit card limit is getting narrow on that.”

• How is India looking to obtain Iranian natural gas without routing through Pakistan? Ironically, running the pipe through water, the source of much tension between the two states, reports Times of India.
• According to Russian news source RT, Putin has confirmed the August opening date of a Russian built nuclear power plant in Iran.
• Check out Grist's "Top 5 Things to Watch," on the climate legislation.
• Tajikistan looks to ease tensions with Uzbekistan through reaffirming its commitment to water sharing, reports The Canadian Press.
• Radio Free Europe/Radio Liberty announces that Iranian President Mahmoud Ahmadinejad arrived in Tajikistan looking to gain a role in energy and water projects and dialogue.

Sometimes you get the rare opportunity to read something that is not only extremely interesting, and relevant to national security, but also makes you laugh. Such was the case yesterday when I came across this Foreign Policy article which discussed how Brazilian President Luiz Inácio Lula da Silva just can’t wait to lay some sugar on his new world power BFF, Iranian President Mahmoud Ahmadinejad. Well, more accurately, a sugar-based product: ethanol. But the possibility to make childish jokes, masking the true urgency of the issue, was too much to resist, as FP guest writer Gal Luft and now I have just proven. . . hence the photo choice.

In the true spirit of Friday’s post, I won’t overburden you with an in depth analysis of the security implications this relationship could hold for the United States (there’s the original article for that), but what I will do is hit you with an abbreviated synopsis of why this is no laughing matter.

U.S. sanctions against Iran, which are working their way through Congress, take aim at Iran’s Achilles’ heel: its energy needs and inability to domestically refine oil from its own massive deposits. Brazilian ethanol could prove to not only be a means by which Iran could brave the sanction storm, but also give it the time it needs to bulk up domestic production capabilities.

In short, if Brazil were to become Iran’s sugar daddy, the United States may find that Achilles just got a hold of some serious Doc Martens, leaving nothing to aim at, and certainly nothing to laugh about.

• According to Business Week, Turkmenistan will begin production of a $2billion gas pipeline to the West to provide an alternative to Russian energy.
• Pakistan and India are looking to establish a deal over two large hydroelectric plants in Kashmir, according to the Daily Times.
• Though the reference may be a bit outdated, San Fransisco's Bay News uses Avatar to frame conflict minerals in the Congo.
• China has announced even tighter controls on their strategic rare earth resources, reports China's own People's Daily.
• Reuters reports that Iran may have plans to cut national subsidies on electricity, water and food to Afghan refugees who have moved into Iran. 

• Senator Kerry outlines the energy and climate bill on Grist.
• Pakistan may take India to international court over a hydropower project which could violate their tense water agreement, according to Asia Times Online.
• CNN says solar energy has a bright future in the United States.
• Russia builds nuclear energy ties with Iran, reports today's edition of Tehran Times.
• All Africa offers some details about the World Bank's efforts to help boost Nigeria's food security.