The shadow of a Malacca Dilemma on an Iranian Hormuz Dilemma

Whoever controls the strait of Hormuz also control Iran’s oil security.

States economic growth traditionally resulted in the development of foreign trade, a factor of expansion of economic and strategic interests on the international stage and the accession to a world power status. It required maritime instruments to sustain, promote and expand the state. The more powerful a state becomes, the more it articulates what’s needed for its growth, and the more it becomes dependent on foreign countries for its energy supply and markets. This makes the state vulnerable to disruptions and threats on an international level.

Starting in the mid-1980s, China became dependent on international markets for growth and energy resources for its development. This new economic configuration had major political and strategic implications, and led the central authorities of Beijing to question the nature of China’s power, especially when it came to protecting trade routes and key international economic flows to the country. Gradually, Beijing recognized its vulnerability in key geopolitical areas, particularly the Straits of Hormuz and Malacca, a topic that became the center of a number of strategic debates.

Former President Hu Jintao articulated this anxiety in what he called the “Malacca Dilemma,” by which “certain powers” could exert influence on navigation in the narrow strait connecting the Pacific and Indian Oceans, through which the vast majority of China’s oil imports pass.

Through the Malacca dilemma, China recognized its energy vulnerability. Indeed, over 25 percent of China’s exports and 15 percent of its imports, 85 percent are hydrocarbons, passed through the Strait of Malacca, one of the busiest trade routes in the world, but also one of the easier to disrupt. Any blocking of the strait could also seriously disrupt China’s economic growth, an essential condition of internal stability and main source of legitimacy of the regime.

China provided different solutions to this “dilemma,” including the development of alternative energy supply strategies crossing the Strait of Malacca and the development of its naval capabilities to ensure the security of its maritime trade routes. These responses required China to leave its borders to protect its economic interests abroad.

The Chinese presence in the Indian Ocean is a matter of supporting its economic development and military capabilities. Its political authorities, likewise, support the expansion of Chinese private enterprises according to their business needs, as well as the formation and implementation of a state strategy to ensure the security of its energy supplies. These policies have been realized through the development of a chain of civilian logistical support in the Indian Ocean and beyond, as well as a sovereign commercial fleet that could allow China to import two-thirds of the oil it consumes by 2020.

As the single point of entry in the Persian Gulf with access to nearly a quarter of the world’s oil, the Strait of Hormuz is of economic and strategic importance for not just for the Gulf but for a number of other countries worldwide. It is of paramount importance for Iran and some of its neighbors, for whom the control of the Persian Gulf and the Strait of Hormuz is essential.

The strait is first and foremost critical to these country’s economies. As the focal point between Iran and Oman’s Musandam Governorate (surrounded by the United Arab Emirates), the Strait of Hormuz is an obligatory passage point for any ship wishing to enter the Persian Gulf. It also provides access to border countries and with no other maritime facade, such as Iraq, Kuwait and Qatar, all of which are major oil producers. Over 17 million barrels of oil pass daily through the strait and it accounts for 35 percent of the world’s seaborne oil trade (20% of total oil traffic), making it critical to the global energy economy. Oil from Iraq and Kuwait passes through here, as well as from Saudi Arabia and the UAE, who have most of their terminals and oil installations positioned on the Persian Gulf. Around 40 percent of the supply of US crude oil passes through the strait, making it strategically important to the United States as well. Indeed, the 5th Fleet of the U.S. Navy — which is based in Bahrain and in charge of the Red Sea, the Arabian Sea and the Persian Gulf — often led patrols and exercises there to protect the oil traffic from potential threats.

The UAE and Iran have long had a long-term ambiguous relationship. The Abu Musa and the greater and lesser Tunb Islands — which are by the sandy beaches of Ras Al-Khaimah, a small emirate north of Dubai – have been occupied by Iran since the departure of the British in the late 1960s. They are, however, claimed by the Emirate of Sharjah.

Still, the fate of the two states is closely linked, even if the Iranians are Shiite and Emiratis Sunni. It is estimated that at least 400,000 Iranians now live in the UAE, 80 percent of which are in Dubai. The first wave of Iranian migrants arrived in the early twentieth century. More came to the UAE following the Islamic Revolution of 1979 and the war with Iraq from 1980 to 1988.

At the crossroads of Europe, Asia and Africa, sits the port of Jebel Ali, another hub for world trade. With 15 million containers passing through it in 2014, it has in recent years become one of the busiest ports in the world. Iranian migrants living in the UAE have long acted as intermediaries, thereby allowing Iran to import products despite them being covered by international sanctions.

Still, trade between the two states has been somewhat affected by sanctions. On on hand, according data from Iranian customs, exports of non-oil products in the UAE to Iran increased by 20 percent in 2014. With $10.6 billion in annual trade, the Emirates remain the top exporter to Iran. But it lost its role as intermediary player with some countries. China, for example, continues to export 276,000 tons of steel annually to Iran, and does so without passing through the Gulf.

An opening of the Iranian market would have a positive impact on the UAE economy. Predictions estimate that there will be a 25 percent increase of oil prices if Iran was allowed to return to the markets.

Maritime transportation remains the fastest and least expensive method of transport, but if the political situation in the region does not improve, is an alternative to terrestrial maritime oil transport credible? There is interest in building a pipeline that would carry oil from Iraqi Kurdistan to Turkey. Red Sea terminals are also under consideration but face major security problems from piracy. A pipeline from Central Asia, or via Afghanistan and Pakistan, is also under consideration. Russia and China both want access through northern Iran.

What’s clear, though, is that once an agreement is reached between Iran and the P5+1, the sanctions relief that follows could increase Iran’s influence in the Gulf and ensure its security while stabilizing its seas.