There is a central claim doing rounds in social media which is startling but not silly: the Strait of Hormuz is not paralysed merely because missiles fly, drones strike and navies posture, but because the commercial machinery that makes shipping legally and financially possible has seized up. The claim’s real insight is that modern sea power is no longer just about who controls the water; it is also about who underwrites the voyage. In that sense, the Trump administration’s $20 billion DFC reinsurance programme is a remarkable admission that military deterrence alone cannot restart commerce if insurers, ports, lenders, charterers and shipowners refuse to play.
Yet the claim may also be stretching the point too far in places. The underlying market has not disappeared altogether, and the precise arithmetic of the “$332 billion shortfall” should be treated as an analytical claim, not as holy scripture. Even so, the broad warning is serious and deserves to be taken seriously by us in India, perhaps more than by almost any other major economy, becauseIndia’scrude, LPG, LNG, freight exposure and inflation sensitivity make Strait of Hormuz not a distant war story but a domestic economic pressure point.
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Also Read:Attack in the Indian Ocean: Why India’s Silence Is So Troubling
The crisis in the Strait of Hormuz is not mainly a military problem but a financial and insurance problem. Even though theUnited Stateshas deployed powerful aircraft carriers and naval forces to the region, that military presence alone cannot make oil tankers move through the strait.
The reason is that ships must carry insurance, especially Protection and Indemnity (P&I) war-risk insurance, to operate legally in international trade. Without this insurance, ships cannot meet the requirements of banks that financed them, cannot enter many ports, and cannot fulfill their charter contracts.
It is reported that seven major marine insurance clubs have withdrawn war-risk coverage for ships in the region. Once that happened, many ships effectively became unable to sail through the Strait of Hormuz, regardless of how strong the naval protection was.
To address this problem, the US government announced a $20 billion reinsurance program through the Development Finance Corporation (DFC). This government-backed insurance is meant to cover potential losses for ships carrying critical cargo such as oil, LNG, gasoline, jet fuel, and fertilizer.
Source: The Probe: Investigative Journalism & In-Depth News Analysis
