Attacks blamed on Iran off the coast of the UAE earlier this month left holes in the hulls of four oil tankers
Reported attacks on shipping, and the ongoing diplomatic crisis between the US and Iran, have this month led the Lloyd’s Market Association’s Joint War Committee (JWC) to add the waters off the coast of the UAE to its list of dangerous seas.
The JWC put out a new document “JWLA-024 Gulf” adding the UAE, Omani and Saudi coastlines of the Persian / Arabian Gulf, west of Longitude 58°E, to its high risk areas.
Attacks on four oil tankers were reported on 12 May near Fujairah, UAE, leaving holes in the hulls of the four vessels.
“In the light of further information received, the JWC has today issued this advisory notice to the market, amending the listed areas which detail areas of perceived enhanced risk for marine insurers and reflecting the enhanced regional risk,” said Neil Roberts, head of marine and aviation at the LMA, in a statement on 17 May.
On its website, the JWC summarised its view on the situation in the Strait of Hormuz.
“The enmity between Iran and Saudi Arabia continues to create tensions as the Saudis believe Iran is trying to control strategic waterways. The recent tightening of Iranian sanctions by the US administration will raise tension in Iran and cause difficulties for Asian buyers.
“Very little information is to hand about the explosions at Fujairah anchorage on 12 May and the circumstances and methods employed remain unclear. There is no doubt that considerable damage was done and there will be significant claims.
“The JWC has met to review the situation and in the light of further information, has updated the listed areas to reflect the perceived heightened risk across the region. The situation will be kept under close review.”
Two of the four ships damaged on 12 May were Saudi-flagged, one was Norwegian and the other one was a UAE-flagged vessel.
No casualties were reported but Saudi Arabia has said two of its flagged vessels suffered “significant damage”.
Local UAE authorities said the four ships were targeted in a “sabotage attack”.
US government national security adviser John Bolton blamed “naval mines almost certainly from Iran”.
Bolton has also blamed Iran-backed forces for drone strikes on two oil pumping stations in Saudi Arabia on 14 May and for a rocket attack that struck near the US Embassy in the Iraqi capital Baghdad on 19 May.
Why this matters
Insurers use the JWC’s list of dangerous waters as a basis for drawing exclusions and pricing risks for marine hull insurance policies, which may lead to the need for additional war risk protection for transiting conflict zones.
The waters covered by the JWC’s pronouncement are a major artery for regional and global shipping and logistics, for the marine and energy industries, as well as the global trading economy, linking the Middle East with Europe with Asia.
The Gulf includes large commercial shipping ports – including bulk, cargo, container and oil terminals – such as the UAE’s Jebel Ali, which is just outside Dubai, and the major Saudi ports of Dammam and Jubail.
Much of the world’s energy supply – crude oil as well as liquified natural gas shipments – travels by tanker from ports within the Persian / Arabian Gulf, which constricts into a narrow choke point in the Strait of Hormuz – with the UAE and Oman on its southern side and Iran to the north – before it can make its way out into the open waters of the Gulf of Oman and Indian Ocean beyond.
The Hormuz Strait is a global strategic flashpoint: Iran’s government has threatened amid previous diplomatic spats to close the strait, which could cripple its own economy but also create a regional economic crisis; In 1984 Iran and Iraq waged the “Tanker War” in the area; and in 1988 the US and Iran fought a brief skirmish in the air and at sea there.
By David Benyon, Consulting Editor, GR