War in Iran: South Korea, India, Australia… The blockage of the Strait of Hormuz, a threat to the global economy?

“Unless the situation returns to normal by May, the global economy will be hit by a historic crisis.” Alarmists, some internet users have started listing in recent days, in various social media posts, the possible impacts of the blockade of the Strait of Hormuz outside of Europe, mainly in Asian and Oceanic countries.

Therefore, South Korea could shift to a “war economy” and without the strait opening in the coming months, Australians would be currently forced to “ration” in order to “save agricultural crops.” Countries like Sri Lanka, the Philippines, Thailand, and India have already begun to implement “emergency measures” such as a maximum gasoline purchase quota and intermittent air conditioning cuts to reduce energy consumption.

“Energy crisis,” “global recession” – Does the blockade of this single strait really have the power to paralyze the economy of so many countries?

FAKE OFF

Plastic shortage in South Korea

If there is no talk of a “war economy” in South Korea at the moment, real problems regarding the production of certain products are beginning to emerge. This is particularly the case with garbage bags, and more broadly with the entire plastic chain. The Korean Federation of Plastic Industry issued a warning on March 25. It announced that the industries in the chemical sector responsible for producing and delivering the synthetic resins needed for making plastic bags had explained the need to scale back production.

Not surprising, as South Korea entirely imports its oil, with over 60% needing to pass through the Strait of Hormuz to arrive safely. On March 24, the South Korean president called on the population to implement a series of measures in their daily lives – take shorter showers, only use the vacuum cleaner on weekends, or avoid leaving their phones charging all night – to save energy, in case the strait blockade continues.

Fruit and vegetable shortage in Australia

Australia is indeed organizing to cope with supply difficulties, including shortages of fuel and fertilizers, as reported by many Australian media. The timing could not be worse. The strait blockade comes at a time when many farmers in the country need to harvest their crops. This is followed by the planting of seeds and land fertilization.

However, without fertilizers, it is impossible to meet deadlines. This is the case even though Australia has the world’s largest certified organic agricultural area – about 35.7 million hectares mainly devoted to fruit, vegetables, and wine cultivation – which theoretically requires less fertilizer. On March 27, a national organization, GrainGrowers, warned that Australia only had six weeks’ worth of fertilizer reserves. A bit tight.

Empty kitchens in India

In India, cooking is done with gas (LPG). And 90% of this gas passes through the Strait of Hormuz. Consequently, gas cylinders are starting to run out. On March 12, Reuters news agency photos showed hundreds of people in the city of Ahmedabad, in the northwest of the country, lining up with empty gas cylinders in hand.

A few days later, on March 24, the Indian government approved a decree aimed at “removing obstacles to the construction and expansion” of natural gas infrastructure, in the hope of quickly diversifying its supply.

Electricity rationing in Sri Lanka and the Philippines

In Sri Lanka, the Philippines, and Thailand, rationing is also in place. So everyone is trying to cope as best they can.

While the Philippines have been in an energy emergency since March 24, in Sri Lanka, coal and diesel have been rationed since March 17. On that day, President Anura Kumara Dissanayake confirmed the difficulties in hydrocarbon supply due to the strait blockade. He therefore asked owners of electric vehicles – representing 10% of the country’s car fleet – to favor overnight charging or via photovoltaic panels.

A four-day workweek has been implemented in some provinces, and negotiations are ongoing with Russia and India for oil delivery.

China and Thailand negotiating

Thailand, however, breathed a little easier on March 28, despite air conditioners being switched off at temperatures above 40°C. According to AFP, the government announced during a press conference held by the Prime Minister, Anutin Charnvirakul, that an agreement with Iran had been reached to allow their oil tankers to pass through the strait. A relief for residents facing soaring fuel prices and forced to limit their movements.

Finally, China, also significantly impacted, seems to have opened negotiations. During a press conference on March 31, the spokesperson for the Chinese Ministry of Foreign Affairs, Mao Ning, confirmed that three Chinese ships had been authorized to cross the Strait of Hormuz in recent days. The blockade deprived China of a significant portion of its supplies: nearly 5.5 million barrels per day, estimated the Institute of International and Strategic Relations (Iris) on April 1.