Could Trump’s Hormuz blockade derail China summit with Xi Jinping?

U.S. President Donald Trump, left, and China's President Xi Jinping leave a business leaders event at the Great Hall of the People in Beijing, Nov. 9, 2017. AFP-Yonhap

Donald Trump’s threat to blockade the Strait of Hormuz “forces Beijing into a political dilemma” and could potentially derail the U.S. president’s coming summit with Chinese counterpart Xi Jinping, analysts said.

After talks in Pakistan between the U.S. and Iran ended without a deal on Sunday, Trump said in a social media post that the U.S. would seal off the strategically vital chokepoint.

In a narrower order issued later, the U.S. military said American forces would blockade only “maritime traffic entering and exiting Iranian ports.”

The order said that this would begin on Monday at 10 a.m., Washington time. The measure applies to all Iranian ports along the Persian Gulf and the Gulf of Oman.

The order said U.S. forces would “not impede” vessels travelling to or from non-Iranian ports.

Around a quarter of global seaborne oil exports and about a fifth of the world’s supply of liquefied natural gas pass through the strait. Tehran enforced a near total closure of the strait after U.S.-Israeli strikes on Iran began on February 28, triggering an energy crisis.

On Monday, Iran said ports in the Persian Gulf and the Sea of Oman were “either for everyone or for no one.”

“If the security of the ports of the Islamic Republic of Iran is threatened, no port in the Persian Gulf and the Sea of Oman will be safe,” a spokesman for the country’s highest operational military command said.

Shipping in the Strait of Hormuz has ground to a halt again following Trump’s announcement, reversing a small uptick in traffic seen on Saturday — when the U.S. and Iran held their first direct negotiations since 1979, in Pakistan’s capital Islamabad.

In response to Trump’s latest threat, Beijing has urged all parties to remain calm and restrained, stressing that the war is the “root cause” of the disruption of navigation.

China hopes the parties will abide by the temporary ceasefire arrangements and “avoid reigniting the flames of war,” foreign ministry spokesman Guo Jiakun said on Monday.

A double blockade would lead to “a complete shutdown” in the strait, which would undoubtedly hurt China’s massive interests in the area, said Jin Liangxiang, a senior fellow at the Shanghai Institutes for International Studies.

The blockade risked affecting China’s supply chains, energy security and trade with Gulf nations, which are an important market for Chinese exports, Jin noted.

The Gulf states supplied 42 percent of Chinese crude oil imports last year, according to customs data. Separately, about 12 percent of Chinese crude oil imports came from Iran, according to analytics firm Kpler.

In addition, China sources one-third of its LNG from the Middle East, with Qatar supplying as much as 28 percent.

A vessel in the Strait of Hormuz is seen off the coast of Oman's Musandam province, April 12. Reuters-Yonhap

Beyond the economic hit, the blockade “forces Beijing into a political dilemma it has spent the entire war trying to avoid,” said Jesse Marks, founder of Rihla Research and Advisory, a Washington-based consultancy focused on the Middle East.

“The longer the blockade holds, the harder it becomes for China to maintain its posture of strategic ambiguity between Washington and Tehran.”

Trump’s order aims to “reverse engineer Iran’s weaponisation of the strait by severing Tehran’s ability to export oil and collect tolls,” Marks argued.

Following the April 7 two-week ceasefire agreement between Washington and Tehran, Iranian officials had raised the idea of charging a ⁠toll for using the strait, according to Reuters.

“If Iran normalises tolling even partially, it reshapes the economics of Gulf energy transit permanently and gives Tehran a revenue stream independent of oil exports. That is what the U.S. is actually trying to prevent,” Marks said.

Marks added that if Washington delivered on its promise to allow the transit of non-Iranian ships, including Chinese ships, the U.S. could “flip the narrative” and frame itself as the guarantor of free navigation.

Iran stressed on Monday that the strait would remain closed to vessels “affiliated with the enemy.”

Earlier reports show that ships linked to U.S. allies such as the Philippines, as well as Chinese and Pakistani vessels, have been able to transit the channel.

Another issue to watch for was if Chinese-flagged vessels carrying Iranian oil were directly interdicted, Marks said.

China has reportedly sustained its Iranian oil trade through a “grey network” of shadow tankers, ship-to-ship transfers and yuan-based payments specifically designed to circumvent U.S. sanctions, according to Marks.

Beijing has repeatedly denied such allegations and says bilateral trade is conducted within the framework of international law.

“That whole network now will be forced to operate inside an active U.S. naval enforcement zone. The blockade makes the detention of a Chinese-linked vessel far more probable,” Marks said, adding that this was likely to create a “flashpoint” weeks before next month’s expected Trump-Xi summit in Beijing.

Trump has said he will visit China on May 14 and 15, the first such trip by a U.S. president in nearly 10 years.

Launching a blockade that directly threatened Chinese energy interests 30 days before sitting down with Xi in Beijing might be a negotiating tactic, Marks said.

“He wants to walk into the summit with a chokehold on something China needs, so he can trade relief for concessions on rare earths, trade terms or political cooperation on Iran,” Marks noted, adding that the risk was that Beijing would read this as coercive, narrowing the space for diplomacy.

Both Washington and Beijing needed to find a way to compartmentalise the Iran conflict before it derailed their trade truce and the stabilisation efforts the two sides had been building since the Busan summit last October, he said.

Jin in Shanghai said the prospects for the summit hinged on Trump’s perceived success in the Iran crisis.

“If the Strait of Hormuz crisis has not yet been resolved, the likelihood of Trump visiting China will certainly be lower,” he said, while adding that Trump’s domestic calculus for the visit had been primarily shaped by trade ties with Beijing and the pressure of the coming midterm elections.

Beijing has yet to confirm the visit.

Read the article at SCMP.