Why is the Strait of Hormuz critical to global energy flows?

Why in News? 

The Strait of Hormuz is at the epicentre of a global economic and maritime crisis. Following the unprovoked US-Israeli attack on Iran on February 28, the waterway now has the status of a “war zone”, placing severe restrictions on the passage of global shipping.

Location of the Strait of Hormuz:

• The Strait of Hormuz is the world’s most important oil chokepoint and critical to global energy flows.
• It is bounded to the north by Iran and to the south by Oman and the United Arab Emirates (UAE). It connects the Gulf with the Arabian Sea.
• The corridor is only about 50 km wide at its entrance and exit, and about 33 km wide at its narrowest point. 

Why is it critical to the global energy flow?

• High Volume Dependency: Around 20-25% of global seaborne oil and roughly 15% of liquefied natural gas (LNG) passes through the Strait daily. 
• Primary Exit Route: It is the primary route for oil exports from Saudi Arabia, Iran, the UAE, Kuwait, Iraq, and Qatar.
• Minimal Alternatives: Very few alternatives exist to bypass the strait; only Saudi Arabia and the UAE possess pipelines that could circumvent it.
• Impact on Global Prices: Any disruption, such as regional conflict, vessel seizures, or threats to shipping, immediately drives up oil prices and disrupts global supply chains.
• Vital to Asia: The majority of the oil passing through the strait (roughly 82%) goes to Asian markets, with China, India, and Japan being the top importers. 

The restrictions on the passage of global shipping have caused the marine insurance premiums to jump from 400% to 600%, and Iran is reportedly demanding tolls of up to $1 per barrel of oil for transit.

UNCLOS, Freedom of Navigation, and the Strait of Hormuz:

• The United Nations Convention on the Law of the Sea (UNCLOS) was adopted in 1982. It lays down a comprehensive regime of law and order in the world’s oceans and seas, establishing rules governing all uses of the oceans and their resources.
• Territorial Waters under UNCLOS:
  • UNCLOS defines territorial waters as extending up to 12 nautical miles from a coastal state’s baseline. 
  • Within this zone, the coastal state exercises full sovereignty, similar to its land territory, subject to certain navigational rights of other states. 
• Maritime choke points and the challenge: Strategic chokepoints (E.g., straits) are often located within overlapping territorial waters. This creates tension between state sovereignty and global freedom of navigation. To address this, UNCLOS establishes two key navigation regimes.

Navigation Regimes under UNCLOS:

1. Innocent Passage: 

• Applies to all territorial seas. Allows foreign vessels to pass through coastal waters, provided the passage is: (i) Continuous and expeditious, (ii) Non-threatening to the coastal states. 
• Restrictions: No military exercises, intelligence gathering, or pollution.
• Coastal states can: Regulate passage; Temporarily suspend innocent passage on security grounds (must be non-discriminatory). 

2. Transit Passage (for International Straits): 

• Applies specifically to straits used for international navigation. Passage must be continuous and expeditious. 
• Unlike in the case of innocent passage, the coastal state cannot suspend or hamper transit passage in any way, nor can it discriminate against vessels based on flag. 

Iran’s Position and Legal Controversy: 

• The Strait of Hormuz connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. The navigable channel lies within the territorial waters of Iran and Oman. It qualifies as a strait used for international navigation (Transit Passage regime applies).
• Iran’s closure of the Strait brings it into direct conflict with the UNCLOS regime of Transit Passage. Iran has signed but has not ratified UNCLOS (similar to the United States).

The Strait of Hormuz is no mere waterway but a vital “jugular vein”, whose closure or disruption poses a grave threat to global security and economic growth.