U.K. Navy Intervenes After Iran Tries to Stop British Oil Tanker
Tim Ross and Anthony DiPaola. Bloomberg•July 11, 2019
(Bloomberg) — The British Navy intervened to stop Iran from blocking a BP Plc oil tanker, the U.K. government said, in the latest evidence that merchant shipping is becoming increasingly embroiled in the wider confrontation with the Islamic Republic.
The BP-operated British Heritage, which can carry as much as 1 million barrels of oil, was attempting to pass through the Strait of Hormuz, a shipping chokepoint at the mouth of the world’s largest oil-producing region, when “three Iranian vessels attempted to impede it,” according to a U.K. government statement.
The HMS Montrose “was forced to position herself between the Iranian vessels and British Heritage and issue verbal warnings to the Iranian vessels, which then turned away,” the statement said. The frigate was escorting the tanker, which had remained inside the Persian Gulf to avoid being targeted in response to last week’s seizure by British special forces of a tanker hauling Iranian crude in the Mediterranean Sea.
Iran denied any such intervention took place.
The flare up is the latest involving merchant ships trading to and from the Middle East, a region that handles about a third of all seaborne petroleum. Six tankers were attacked just outside the Persian Gulf between mid-May and mid-June and the U.S. blamed Iran, an allegation Tehran denied.
Authorities in Gibraltar, assisted by British Royal Marines, seized the supertanker Grace 1 last week, claiming the ship was taking oil to Syria in breach of European Union sanctions. Iran denied the vessel was heading to Syria and vowed to retaliate. On Thursday, Gibraltar police announced they had arrested the master and chief officer of the Grace 1, following a search of the vessel.
The escalating tensions come as European nations scramble to salvage a landmark accord with the Islamic Republic intended to prevent it from developing a nuclear weapon. The U.K. has been a leading voice in trying to rescue the the 2015 deal after U.S. President Donald Trump pulled out and Iran stepped up uranium enrichment in defiance of extended sanctions.
“We are concerned by this action and continue to urge the Iranian authorities to de-escalate the situation in the region,” Prime Minister Theresa May’s spokesman, James Slack, told reporters in London. “We have a long standing maritime presence in the Gulf. We are continuously monitoring the security situation there and are committed to maintaining freedom of navigation in accordance with international law.”
Iran’s Revolutionary Guard Corps denied trying to impede the British tanker but said its forces could act fast if ordered to do so. “If it receives an order to seize foreign ships, naval forces can act fast, with determination and without hesitation within the geographic scope of its mission,” the semi-official Fars news agency reported.
Benchmark Brent crude was 3 cents higher at $67.04 a barrel in London trading at 4:47 p.m. local time. Oil has been rallying since the middle of last week as tensions surrounding Iran stoke concerns crude flows may be disrupted.
The British Heritage was able to pass safely through the Strait of Hormuz and was sailing along the Omani coast, according to tanker tracking data compiled by Bloomberg.
BP had been keeping the British Heritage empty inside the Gulf, near Saudi Arabia, rather than risk its seizure by Iran in a tit-for-tat retaliation over the Gibraltar action, a person familiar with the matter said Monday.
The U.K. repeated its insistence that the seizure of the Grace 1 in Gibraltar was about Syria, not Iran. “We’ve been very clear that Grace 1 is a Syrian sanctions rather than an Iran issue,” Slack said.
Insurance costs for covering tankers and their cargoes jumped as much as tenfold in the wake of the incidents in May and June. Some owners were initially wary of sending vessels to the region, although that reticence appears to have subsided.
U.S. Push to Pressure Iran Rebuffed at Nuclear Meeting in Vienna
The prospects of a showdown between the U.S. and Iran have spiked since the Trump administration quit the multiparty nuclear accord with Iran a year ago and re-imposed sanctions. In early May, the U.S. tightened penalties on buyers of Iranian oil prompting Iran to begin scaling back its commitments under the deal.
Iran said this week it’s enriching uranium beyond the agreed cap and would gradually roll back compliance unless European signatories find ways to ensure it can sell its oil and access the global financial system.
Iran is producing oil at the slowest clip since 1986, making U.S. sanctions as effective as the devastating Iraq-Iran war that ended more than 30 years ago. The measures have hit the currency, fueled inflation and hobbled growth.
The stand-off also comes at an awkward time for Britain which, along with its European allies, is trying to keep the nuclear deal alive, but is also relying on Trump’s White House to clinch a trade deal after Brexit.
The British Heritage was meant to load crude from Iraq before sailing onto Europe but a person with knowledge of the matter said BP elected not to lift the cargo because of concerns about the wider political situation. The ship didn’t have oil on board when it left the region, the person said.
There are six vessels operating in the Gulf registered to Britain, or a British Overseas Territory, and five operating under the British flag. In total, they have the capacity to transport almost 9 million barrels of crude.
The incident was originally reported by CNN, which cited two U.S. officials saying Iran had tried to seize, rather than impede, the tanker and order it to change course.
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