Strait and narrowing: the Iran deal crumbles
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What is the main topic discussed in this episode?
The Economist. Hello and welcome to The Intelligence from The Economist. I'm Jason Palmer.
Today on the show, why India's government can't build a decent website and summer camps, but for grown-ups.
First up, though.
Here we are again. Missiles are flying over and out of Iran. That long-awaited deal of a month ago to end the war is now in tatters.
How has the memorandum of understanding to end the Iran war collapsed?
You know, this deal.
We reached an agreement with Iran that achieves everything we set out to accomplish, everything and much more.
Strong mission accomplished vibes, right? But again, the Strait of Hormuz is all but pinched off. And the fiery rhetoric? It's back too.
And they're a bunch of scum. You want to know the truth. They're scum. And so we don't like them. I don't like them. And they're evil people.
For a hot minute there, Mr. Trump said he'd start charging a toll in the Strait, but soon after walked it back.
I don't think anybody should be able to charge a fee for the Strait.
What is the current security situation in the Strait of Hormuz after recent strikes?
That's just one hint of how constrained his options really are.
We've now had six nights of tit-for-tat strikes. Iran started the fighting by attacking three ships in the Strait of Hormuz. Greg Karlstrom is a Middle East correspondent for The Economist. This is something less than the all-out war that we saw back in March. But nonetheless, it looks, at least for now, like the memorandum of understanding between the two countries is dead. And Donald Trump is back to using the same sort of inflammatory language he used earlier in the war.
We're going to hit them very hard tomorrow night. We're going to hit them very hard the night after. And then next week it gets really bad for them because next week comes the power plants. Next week comes the bridges. We're going to knock out all that power.
Donald Trump wants the Strait of Hormuz to reopen, but he has no good way to do it.
So what about that memorandum of understanding, the deal to make a lasting deal? What happened?
It was a very vaguely worded memorandum, which turns out not to be a good way to draft a diplomatic agreement. And the dispute here is around the fifth paragraph in particular, which states that Iran will make arrangements for the safe passage of commercial vessels. through the strait. Now, the Americans read that to mean Iran will remove the mines that they have scattered through the Strait of Hormuz and they will unlock it and allow ships to travel through. And that's it. But the Iranians read something more into that language. They think that also confers a right to administer traffic through the strait.
Why do Americans and Iranians disagree about who controls passage through Hormuz?
So to decide which vessels can move and when. And obviously, the Americans disagree with that. So for weeks, they have been helping Iran to escort tankers through the southern route of Hormuz, which goes through Oman's territorial waters, doesn't cross Iranian waters, and therefore the Iranians have no say over what happens there. Iran quite unhappy with that because it thinks it erodes what it believes to be its right to control traffic.
So once again, sort of not clear whether the Strait is open or not.
It depends on who you ask, right? The Iranians say that it is now shut altogether. They made that announcement a few days ago. Donald Trump continues to insist that actually the Strait is open. But what's relevant here is not what the Iranians or the Americans say. It's what ship owners and insurers think. Do they believe... that it's actually safe to transit through Hormuz. And after a string of Iranian attacks over the past eight or nine days, it's very clear that most ship owners do not consider the Strait safe. So we've seen a significant drop in traffic. If you go back to about 10 days ago, you had 30, 40, even 50 ships transiting on some days. Whereas on July 12th, just 11 vessels transited the Strait and traffic has remained stable.
at that very low level ever since. So very few ships willing to use Hormuz. And consequently, we've seen oil prices start to climb from about $71 a barrel once the MOU was signed to the mid 80s. Now there's been almost a 20% increase in oil prices over the past 10 days.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:03–0:58
2
How has the memorandum of understanding to end the Iran war collapsed?
0:58–1:38
3
What is the current security situation in the Strait of Hormuz after recent strikes?
1:38–3:16
4
Why do Americans and Iranians disagree about who controls passage through Hormuz?
3:16–6:14
5
How are shipping owners and insurers reacting to attacks in Hormuz and what impact is this having on oil prices?
6:14–9:54
6
What military and non-military options does the United States have to reopen the Strait of Hormuz?
9:54–16:51
7
Could negotiations resume and what would Iran need to decide to restore the deal?
16:51–22:10