Businesses worldwide are skeptical about whether a precarious US ceasefire with Iran means an end to the uncertainty surrounding the Strait of Hormuz and its global impacts, lobbyists say.
While the ceasefire is a step in the right direction, the situation is “minute by minute,” said Hunter Morgen, an international trade lobbyist at Ballard Partners. His advice to anxious clients as ceasefire talks continue over the next two weeks can be boiled down to: “Just be cool.”
It’s a message that’s being echoed up and down K Street as lobbyists aim to keep calm and not further roil industries during a precarious, international situation.
“Don’t overreact,” Morgen added. “Don’t be optimistic. Don’t be pessimistic.”
Energy industry clients are concerned about the uncertainty and volatility, Frank Maisano, a partner at Bracewell’s policy resolution group, said.
“They just don’t know what is going to happen. And there is no way they can really predict what is going to happen,” Maisano said. “You’re going to see the energy sector stay in the same place where they’ve been, which is: We need certainty, we need to have policy assurances.”
‘Very Tricky’ Weeks Ahead
The next two weeks will be “very tricky, and we may not learn very much about the future for some days to come,” said Paul Jones, a former US ambassador to Poland and Malaysia who now serves as an international affairs adviser at Squire Patton Boggs.
Jones said he’s warning clients that Washington and Tehran remain far apart on “some fundamental outstanding questions” about a peace deal — and that a resumption of fighting can’t be ruled out. One potential sticking point, he predicted, is that Iran likely won’t relinquish control of Hormuz easily.
Energy interests are making sure policymakers understand that there isn’t going to be a quick fix.
“The actual recovery of the market and the energy industry, that’s not going to be a short turnaround,” Maisano said.
Even with rising gas prices in the US, lobbyists said domestic energy producers have helped mitigate the situation.
Domestic Production
“We’ve never been more dependent on US oil and biofuels, I think that opened the eyes of a lot of people in the industry,” said Louis Sola, a partner at the lobbying firm Thorn Run Partners and a former chair of the Federal Maritime Commission.
A reopening of the Strait of Hormuz would be good for Asia and Europe, but the closure was good for US producers, Sola said, adding: “Just look at the stock market price of any oil company.” Shipping carriers and cruise lines, Sola said, “are definitely feeling the pain” because fuel is a major operational cost.
Energy industry lobbyists say it will take time, even with a peace deal, for gas prices to go back to where they were before the conflict began. There are some 200 tankers trapped behind the strait, Mike Sommers, president and CEO of the American Petroleum Institute, said in an interview Wednesday on CNBC.
“American oil production has really provided a buffer for this geopolitical moment that we’re in,” he said.
Meanwhile, shipping and logistics companies — and the companies that insure them — face more immediate choices about “under what conditions would they be willing to try to put ships through” the strait, Jones said. As do farmers around the globe who rely on fertilizer inputs from the Gulf. “They all have decisions to make that they can’t really delay much.”
Whatever happens, Jones cautioned that supply chain uncertainty will remain a feature of geopolitics — not a bug. “This is part of a different era that we are deep into,” he said.
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