Friday, January 3, 2020

Assassination of Iranian General Soleimani May Have Serious Consequences for Vessels and Shipowners

With War Risk Insurance Policies Already High the Threat of More Revenge Maritime Attacks Has Grown
Shipping News Feature

IRAN – THE GULF – WORLDWIDE – The assassination of General Soleimani, commander of Iran's Quds Force, by an American drone strike in Baghdad last night is likely to have far-reaching consequences all across the region, and will probably affect the future of shipping in the region.

Soleimani was widely considered the second most powerful figure in the Iranian establishment, only ranking behind the Ayatollah Khamenei himself. He was also the key person in spreading Iranian influence throughout the region, principally in Iraq and Syria, as well as reinforcing Hezbollah in Lebanon and the Houthis in Yemen.

His death is therefore hugely significant, particularly as when seen with Iranian eyes. To them this will doubtless be viewed as an act of state sponsored terror, authorised by no less a figure than the American President. The Iran government has already declared three days of mourning and called the act ‘an act of international terrorism’.

However what will concern shipping companies and the maritime insurance groups is the potential reaction which may well come from Soleimani’s subordinates, the Revolutionary Guard and the Quds Force, who have ample experience in causing problems in the Gulf for merchant shipping.

These two organisations have been responsible for attacks on shipping in the Gulf and have been increasingly belligerent in recent months in the region. With the death of their supreme commander, a figure revered by many of the Revolutionary Guard, we can expect to see reprisals.

As a result, shipping lines should probable anticipate the very real possibility of hostilities occurring within the Gulf region. Even nations with no interest in a US-Iranian conflict need to be aware that should missiles start flying, these weapons don’t care if they’ve locked onto a warship or a neutral merchantman.

Additionally maritime operators should probably consider that the Quds force is widely thought to have been the party responsible for giving the Houthis and Hezbollah advanced anti-ship weapons. With their most senior sponsor now dead, these parties may also seek, or be pressured, to act on Iran’s behalf. This means both the Red Sea and the Eastern Mediterranean should be considered risk areas.

For some time vessels passing through the Strait of Hormuz have been under instruction to only travel during the day, and then at high speed. Around 2,000 companies run through the Strait on a regular basis, a waterway less than 2 miles wide at one point thus making shipping an easy target for fast attack craft.

Like the financial markets, shipping insurers often pre-empt problems by hiking rates, the assassination today, ordered by a President facing impeachment and doubtless looking for an improved image, will doubtless cause a hike in insurance rates in a market which already sees premiums up to around $200,000 for supertankers using the waterway. Simon Lole, of specialist marine insurers Peter Lole, commented:

”I don’t think anyone saw this coming. We will see how it affects the market over the next day or so but I feel certain that there will be some very nervous people considering the potential new risks. The possibility of a revenge attack on some innocent party is always present, and the insurers know this.”

The act of assassination itself will of course divide opinion. Whilst Trump can point to the elimination of a man charged as directly responsible for the deaths of hundreds of US troops there are few in Iran who will take the same view, with many potentially seeking revenge. When the attacks from pirates off the Somali coastline grew untenable the combination of international forces (including both Iranian and American), and the presence of armed guards on board transiting vessels, managed to subdue the threat.

This current situation is very different and the great fear will be that, instead of nipping the problem in the bud, things may now degenerate and spread violence further afield.

Photo: The late General Qasem Soleimani.