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Iran's Leverage over the Global Economy Weakens Every Day
(Atlantic Council) Landon Derentz - At what point does the U.S. stop treating the Strait of Hormuz as a crisis to manage and start treating it as an opportunity to permanently redraw the global energy map? For weeks, Iran has benefited from a basic strategic assumption: The Strait of Hormuz is too important to the global economy for the U.S. and its partners to tolerate its prolonged disruption. While the closure of Hormuz is painful, the question is whether that pain is more strategically endurable than the concessions Tehran hopes to extract in return for ending it. Iran's leverage over the global economy weakens every day it holds the Strait of Hormuz hostage as energy markets adapt. For half a century, the structure of global energy markets has been moving gradually away from the concentration that defined the oil shocks of the 1970s. The U.S. shale revolution transformed the country from an increasingly import-dependent energy consumer into the world's largest producer of oil and natural gas. Brazil has emerged as a major offshore oil producer. Canadian oil output has expanded alongside new access to Pacific markets. Large offshore discoveries in Guyana have created an entirely new oil-producing state in less than a decade. Chinese crude imports fell by 32% during the second quarter of this year from first-quarter levels. Saudi Arabia and the UAE are maximizing existing pipelines and accelerating new infrastructure that bypasses the Strait of Hormuz. All of these measures are buffering the world from the worst economic effects of the crisis. Every barrel produced somewhere else, every pipeline constructed around Hormuz, every strategic stockpile expanded, and every unit of oil demand displaced represents a small reduction in Tehran's future coercive power. That is why the Trump administration does not need to rush to make concessions in negotiations with Tehran. The writer, vice president for energy and infrastructure at the Atlantic Council, served as director for energy at the White House during the first Trump administration.