Port of Los Angeles briefing: Iran war could lead to long-term price hikes

“Prices are going to be elevated, I fear, in perpetuity, because it's not simply a consequence of supply, it's also a consequence of extraction. And when they rebuild … in Qatar, which is going to take years and cost billions of dollars, they are not going to rebuild it the way it was built the first time. Next time, it's going to be armored. It needs to be protected. They need to design it in a different way because Iran will continue to be a threat going forward,” according to Dr Jerrold Green, Senior Fellow, Burkle Center for International Relations at the University of California at Los Angeles.

Dr. Green was speaking at the Port of Los Angeles media briefing on April 12^th as the guest of Eugene Seroka, the Port’s Executive Director. Seroka introduced Green recalling that “for more than 16 years he served as President of the Pacific Council on International Policy, where he continues to serve as Senior Fellow for the Middle East and South Asia.”

Green said that the Iran war has severely tarnished US credibility with its allies and with nations in the Middle East, because the Trump administration gave no warning that it was intending to go to war: “This war came out of nowhere. Nobody predicted it, nobody expected it and it was a body blow. A body blow for our friends in the Gulf: Qatar, the UAE, Kuwait, Saudi Arabia, they've all been attacked by drones and missiles … the homelands of our allies have been attacked. And so, the trust that was there is gone. The world has changed and it will never go back. And when I talk to my friends in the Gulf, which I do regularly, they are going to have to invest much more heavily in defense because of their vulnerability to Iran. Their relationship with us is going to change.”

Blockading the Blockaders Strategy?

In his remarks, Green was critical of the Trump administration’s imposition of a blockade over shipping entering and leaving the strategic Strait of Hormuz. Green characterized this as a desperation move similar to a real estate entrepreneur trying to make a quick deal while Iran stretches out negotiations to see who will be the first to blink: “Well, we are blockading the blockaders because the Iranians were blockading first. They were blockading who they wish to blockade … And so far, we are alone in our blockade. Washington has said that others will be joining the blockade. Nobody has raised their hand. So, we are there on our own, which again makes it challenging. And the implications go far beyond the Middle East. If we are focused so heavily on the Middle East, then who is paying attention to the South China Sea? Who is paying attention to Asia? …. That is quite concerning…. Washington likes to do things quickly. There is a sort of real estate mentality in terms of negotiating and doing deals. The Iranians like to do things very, very slowly. They like to do it in a protracted way …So Washington negotiates in one fashion, Iran negotiates in another. And the question is, who is going to be able to absorb more pain, the United States or Iran? Iran survived an eight-year war with Iraq, so pain is not something new to the Iranians. And Washington is concerned about the midterm elections, the economy, the price of petroleum, agriculture, fertilizer and so forth.”

Green added that threats to the Suez Canal and Red Sea access could be rekindled if Iran’s Houthi allies continue to attack shipping in the Red Sea: “Well, the Houthis can control … the Red Sea. And so, the Houthis could try and blockade or certainly slow things down there at the same time.”

Global Impacts

The global impact of the war can be considerable aside from high oil and fuel prices” There is nothing that we should not be concerned about. Nothing. I mean, the production of pharmaceuticals, which leads to global health risks. Anything involving supply chains is being affected.”

One major change, Green sees, is that EVs are likely to make a comeback because of high gas prices at the pump: “Electric cars are out of fashion …Now they're back because of the price of petroleum. This will affect you and your industry, but it affects all of us, certainly the American taxpayer, American consumers. But consumers everywhere, consumers in every country in the world are being touched by this.

Green said the Trump administration may be hoping that “the Chinese will be unhappy not having access to Iranian petroleum and therefore China will pressure Iran to make a deal more quickly with the United States … I would be very surprised if that would happen. The Iranians have become geniuses at working around sanctions. They have been doing it forever. As have the Chinese … There is nothing here that is not at risk. Nothing.”