How to get through the Strait of Hormuz

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Right now as we record this show, Tuesday, April 14th around 2 p.m. Eastern, Iran and the US are still blocking marine traffic from leaving the Persian Gulf. We have no idea how this is going to play out. But we do know that it will have huge implications for the global economy. And for this guy. Testing 1, 2. Okay. It's recording. Who are you and what do you do? Christian Saint Claire, I'm the production manager at Phantographics Books. Yes, books, but hold on. This is not a show about the Planet Money book. It's about two books that Christian from Phantographics has been working on. That are weirdly connected to the war between the US and Iran. I first called Christian a little over a week ago, just before the ceasefire was announced. And he told me about the books in question. One is Roberta Gregory's Bitchie. It's a collection of kind of feminist comics. And then another one is Adventures Into Weird Worlds. The books were printed in India. And Christian got word in February that they were on schedule to be put on an enormous and very, very hot pink container ship called the One Majesty. It would get to the US in early April, right on time for a book launch party. And then the war started and Iran effectively cut off these skinny waterway ships used to get in and out of the Persian Gulf, the straight of Hormuz. Not too long after, Christian was at a production meeting and a colleague asked, "Do any of our books go through the straight of Hormuz?" And I was like, "No, I don't think so. I was like, you know, they usually just go straight through the Suez." And yet, couple weeks later, Christian was wondering about the status of those books. And he Googled the name of the bright pink ship, the One Majesty. I just thought it would show up on Vessel Finder like it always did, but I just plugged it in again only this time. It's like, you know, it's like, "Oh, God! One Majesty has been attacked in the straight of Hormuz." And I was just like, "Oh my God, you've got to be kidding me." Christian learned that the crew was safe. The cargo too. Apparently, the attack left the ship with just a small hole in it. But it was not going anywhere anytime soon. It was stranded in the Persian Gulf. When Christian, sitting at his desk in Seattle, he knew these books were not a big deal in the grand scheme of things. There was a war going on. People were dying. Iran's blockade of the straight had cut off 20% of the world's oil supply and other important commodities like helium and fertilizer. No, for Christian, like many of us, the experience of the war has been kind of removed. We've mostly seen it at, you know, the gas pump. Christian has seen it with these books, which he kept checking on every day by looking up the status of that bright pink ship. For a long time, if you looked up that particular ship on the Marine Tracking websites, it just kept pushing out the arrival date by day, even though you knew that was not going to happen. And you know, and it's still literally showing it in the straight of Hormuz. And then I just checked it and it now says like the ship is location unknown. Ain't that a metaphor. Low and welcome to money. I'm Nick Bouton. As we tape this show, US warships are continuing their blockade of Iran. Iran still controls the straight of Hormuz and a big portion of global commerce is still stuck. Today on the show, we're going to focus on a key sticking point between the US and Iran. The future of the straight of Hormuz. And ask, how have ships been getting through the straight? What does Iran's control of it mean for the global economy? And what's happened with Christian's books and that bright pink ship? The US has been at war with Iran since February 28th. And for that month and a half, Iran's main leverage over the US has been their control over the straight of Hormuz. They've attacked ships that try to pass without approval. And recently they've insinuated that one part of the straight, the part near Oman, is not safe. Like, maybe there are minds. Which means captains have to go right by Iran shores to get through the straight, effectively creating a choke point for the global economy. This week on Tuesday, when President Trump announced a ceasefire, he said the Iranians had agreed to completely open up the straight. But the next day, the ships in that area got a very different message. "I mentioned all vessels in turn and goal of an Oman sea. Transiting in a straight up remote is closed yet." Transiting in the straight of Hormuz is closed. "If any vessel tries to translate, we don't permit it with the destroyed." If any vessels try to transit without permission, they will be destroyed. Which was kind of a clue that some ships were able to get through with permission. Maybe this was a way out for the bright-pig chip? I wanted to figure out how that permission works. How do you get it and what does it cost? So I started calling around. Yeah, by the way. Hello? Yes. Who's speaking? This is Nick Fountain. I just message you. I was honestly kind of surprised to get Hamid Housani on the phone. He's not a government official, but he is very well connected in the oil and gas industry. He's a spokesperson for Iran's oil, gas, and petroleum products exporters union. OPEX. Where are you located these days? Are you in Tehran? Yes, I'm in Tehran. And how has the last month and a half been for you? Okay. We must care about ourselves. But for Iran, he's normal. Don't worry about us. You are safe. Hamid seemed relieved for the ceasefire. Excited to be a little less on edge. What do you do for fun? Fun? I play football. Football? Are you good? What is your record? All our players are more than 40 years. We are old men. We are not young. You're the old guys. We play with old guys. But back to the straight up hormones. Hamid confirmed, yes, there is basically a toll system. In fact, he said, just the other day, a friend of his and Indian guy went through the straight and told him how it works. The friend had a ship full of oil, and that ship had been stuck in the Persian Gulf since the beginning of the war. But he wanted to get it out. He wanted to get it to India. So the friend got in touch with the Indian government who helped him broker a deal. He explained to me that he contacted with the. revision regard to Sepal Navy. Sepal Navy. Okay. The Sepal Navy is part of the most powerful military body in Iran, an organization called the Islamic Revolutionary Guard Corps. Okay. I contacted them and informed them. I am interested to ask the hormones. Passed through the straight, yes. Hamid's friend got word that it was possible, but first he had to send some information. Like ship name, country that it's flagged, where it's headed, what's on board, who's on board? The team. Okay. That's working in the West. Hamid said the Iranians were mainly checking to make sure the captain and the crew weren't from the US or Israel or Iran's other adversaries, and that the ship and cargo weren't affiliated with those countries too. So he said, as far as he knows, the Iranian authorities were not verifying what who was on the vessels by boarding or sending drones. For Hamid's friend and his ship, everything checked out. They checked everything about personal, about the vessel, about the flag, about the owner, about the destination of the cargo, then they checked everything, then they approved. They approved. But his friendship could not pass yet. And he had to pay a toll. Before passing, ask him pay for each barrel, one barrel, one dollar. Hamid's friend told him the ship had to pay one dollar per barrel of oil. And keep in mind, these ships, they are big. Very large crew carriers or the LCC's carry two million barrels of oil. So these tolls could be as much as two million dollars each time. But Iran does not want to be paid in dollars. Hamid's friend told him. He told me pay by crypto. Crypto? Yes. Very limited time. They gave him very limited time, only five seconds. Five seconds. Give him a count. Five seconds. second you must pay. There are a couple reasons to not use dollars. Crypto helps everyone avoid US sanctions and also lets the Iranians move the money quickly. Five seconds is extraordinarily quick. Was that an exaggeration? It's all right. I don't know about the pain. It was successful to pay. Hami says his French oil ship sailed through and made its way to India. So you got this information from a person who had an oil tanker. Also, Separat Navy. They confirmed that this is the process. Hami told me his contact at the Iranian Separat Navy said this is the system. I asked Hami to connect us with his Navy source who gave him this info. He wouldn't. Same to with his Indian friend with the oil tanker. Before I let Hami go, I told him about Christian and the comic book stuck on the bright pink ship in the Persian Gulf. He was like, "Oh, but it's in touch." Maybe can help him. Maybe can help him. If we send information, maybe we'll be able to help him. Seriously? Yes. If destination was not USA. There is no situation. Contrary, no problem. Destination is New York City. Maybe let's see what will happen. Basically, Hami is saying since the ship is going to the US, Christians only hope might be successful negotiations between the US and Iran. Okay. Stay safe and thank you so much for the time. Okay. Bye-bye. Okay. Bye-bye. So it seemed unlikely that Hami could help Christian and the bright pink ship. I also tried reaching out to the shipping company that owns the one majesty, and they said they wouldn't comment on these status of the ship. But there was one person I wanted to check with. Am I coming through your headphones? Yes. Perfect. Let's do this. Ryan Peterson found her in CEO of Lexporer. We've had Ryan on the show before. And the reason I called him is because his company is at the center of global logistics and shipping. They have containers going every which way at any moment. He has sources at every major shipping company. He is very keyed into this stuff. I asked Ryan, hey, do you know what's happening with the bright pink ship, the one majesty, the ship that might have Christians books on it? And he was like, no, we do have some containers stuck in the go. Just not on that ship. But he did have some info for Christian, and it was not good. Apparently when a ship is damaged like the bright pink ship was, the ship owner might use something called the law of general average. And what general average says is that if there's damage to some cargo on the ship, it's shared equally across all of the people who have cargo on the ship. So you all share in this together, including damage to the ship itself. It's actually you as a customer of the ship are liable and you're on the hook for that damage. If the law makes sense in that if there's a disaster at on the high seas, the last thing you want is the sailors, the captain thinking about which cargo to throw overboard in order to save the ship. You just like just throw the cargo overboard. And we'll figure it out later. Which means Christian and his comics publisher, their insurance company, could be on the hook for damages sustained to the bright pink ship. But while we had Ryan on the line, might as well ask him the big question, what does a potential toll booth in the straight of Hormuz mean for global shipping and the global economy? He was like, well on one level, it might just mean one more fee that makes everything a little more expensive. But also it might mean a huge shift because for 70 something years, the US Navy has been guaranteeing the free flow of goods throughout the world's waterways. We really kind of take it for granted that that anybody can just sail anywhere and nobody's going to attack your ships and there won't be pirates and other countries, navies attacking you. But this is a pretty new phenomenon. And so this is a huge challenge to that order which says, well maybe the US Navy can't guarantee freedom of navigation anymore. How important is this freedom of navigation freedom of the seas for global commerce? It's the heart of globalization and so it's global commerce and some level is the modern world that we're all used to. Yeah, the modern global economy requires the free flow of goods around the world and that is in the balance right now, which might explain why the Trump administration has made opening up the straight up priority in their negotiations with Iran and responded with their own blockade to prevent ships from going to and coming from Iran because freedom of the seas is such a big deal. I mean it would be a really big deal if you had a state in Iran that is now able to kind of dictate terms to the United States of America as the end of American order. Like that's the big deal. Like the dollar value of the toll like doesn't really matter. But if you're saying, hey, the US Navy is no longer the big boss of the seas like wow that really changes quite a few things. I think would cause a lot of companies that are thinking in a big system's big picture kind of way to say, hey, maybe doing global long distance trade is too risky. Maybe we should think about regional supply chains. Maybe the US American companies start thinking about manufacturing in Latin America or even back in the US. And that would be an enormous shift. Speaking of enormous after the break and update from Christian on his books and the bright pink ship, he's got some news. Hey, how's it going? Good. How about you? Good. A few days after I first talked with Christian, the comic guy, I got him back on the line. I was excited to tell him about all I'd learned. The bad news about the law of general average, about what I'd learned about the tolling system from Hamid and his sort of offer to smooth things over. But before I got to any of this, Christian told me that he had news. The books all the time were in India. What? Yes. Apparently the books were in India. Christian had thought that they'd made it onto the bright pink ship, the one majesty, but that ship got way laid in the Persian Gulf. The ship never even made it to India. So the books never got loaded onto it. They were never on the ship? No, they were never on the ship. What a relief. Yeah, no, no, no potential toll fine. No toll, no law of general average, no blockade. In fact, just the day before the books have been loaded onto a different ship. Also bright pink. Apparently that's the vibe of the shipping company. The ship has officially set sail. They're on their way. Yes. Incredible. He said he's hoping the books will only go on sale about a month late. If this current sailing schedule holds, which I am pretty confident at this point, it will mid mid July. You're confident in anything in global shipping at this point? Well, there's only so many things that can go wrong with one particular book. So I feel like these books have exhausted that negotiations between the US and Iran broke down over the weekend. And a big sticking point is the future of the trade of hormones. If and when negotiations start back up, there are kind of four main options for the trade and open waterway with no tolls. A toll booth where Iran gets the tolls. One where the US gets the tolls are, I don't know, one where they split them. All we do know is that the fate of global commerce and the global economy kind of depends on how it all shakes out. Hey fellow Southern Californians, Thursday, the 16th of April, 8.8 this week, Sarah Gonzalez, Jack Corbett, Alex Myosi, myself are going to be with a very special guest live on stage, chatting about the Planet Money book, and there's also more tour dates throughout the rest of the country and one even in Canada that should be equally as cool. This episode of Planet Money was produced by James Sneed, edited by Jess Zhang, fact check by Sarah Waters, and engineered by Kweicy Lee. Outskull Mark is our executive producer. I'm Nick Bounton, this is NPR, thank you for listening.