The Strait of Hormuz feeds 100 million people. Major Implications of the Shutdown Beyond Power Sector Issues
The Strait of Hormuz, through which about a fifth of the global supply of oil and liquefied natural gas passes, is more than an energy route for the countries of the Persian Gulf, being the route through which most of the food shipments that the region imports pass through, one now considered high risk by insurers and shipping companies, according to CNN.
Saudi Arabia imports over 80% of its food, the United Arab Emirates, around 90%, and Qatar – around 98%. Most of Iraq's food imports also pass through the Strait of Hormuz.
According to UK Maritime Trade Operations (UKMTO), a monitoring agency run by the British military, nearly two dozen ships have been attacked in the region since the start of the war on February 28, including a cargo ship off the coast of Oman. Therefore, shipping companies are not willing to take the risk of crossing the Strait of Hormuz.
With the waterway virtually closed due to the war, food carriers are now scrambling to find alternative routes, some more expensive and logistically demanding, which cannot fully replace the lost flow anyway. Thus, the possibility of higher prices increases and consumer options are reduced.
Even Iran, which closed the strait in response to attacks by the United States and Israel against it, depends on Hormuz for much of its trade.
Supply chains could be on the brink of the most severe turbulence following the crises caused by the COVID-19 pandemic and the start of full-scale war in Ukraine, the World Food Program (WFP) has warned.
Transport costs have risen sharply, says Carl Skau, WFP's deputy executive director.
Big problems in the transportation of goods
According to retailers, while a famine crisis is not imminent in the Gulf region, the conflict has significantly affected the shipping of goods.
United Arab Emirates-based fresh food and vegetable retailer Kibsons International, which imports 50,000 tonnes of food a year from countries such as South Africa and Australia, said attention was now turning to rerouting shipments.
“The supply chain is extremely difficult right now,” said Daniel Cabral, director of procurement at Kibsons.
Another problem is the large number of ships at sea. Kibsons has “tons” of food — most of it fresh — in containers on ships currently waiting outside the strait, Cabral told CNN, with no confirmed arrival dates or even ports. “There's a lot of uncertainty,” he said.
“Clauses of War” activated
The Kibsons representative explained that the so-called “war clauses” in shipping contracts now come into force. They protect ships from entering dangerous territories and give them the right to choose a port of disembarkation for their shipments.
One of the Kibsons containers, which was destined for Dubai's Jebel Ali port, is now in Mundra, India. Another was redirected to Colombo, Sri Lanka.
Even so, the problems don't end once they arrive on land.
“The shipping line said, 'What would you like to do with it now? Would you like to sell it in India?' Or, you know, “what are you planning with him?” And that puts us in a very difficult position,” added Cabral.
