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US presses other countries to police Strait of Hormuz

Highlights

Pompeo, Trump want China, Japan to protect energy flows

Trump calls tanker attacks 'minor,' downplays supply impact

US sending 1,000 troops to Middle East

Washington — The Trump administration Tuesday pressed other countries to step up their efforts to protect navigation through the Strait of Hormuz, while also downplaying the market impact of recent attacks on oil tankers in the Gulf of Oman and the threat of war with Iran.

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In remarks at US Central Command in Florida, Secretary of State Mike Pompeo specifically cited China, South Korea, Indonesia and Japan as having "enormous interest" in freedom of navigation through the Strait of Hormuz.

"The United States is prepared to do its part, but every nation that has a deep interest in protecting that shipping lane so that energy can move around the world and support their economies needs to make sure they understand the real threat - the real threat to their interests in the region, and the real threat to their countries' economies if we're not successful in doing that," Pompeo said.

In an interview with Time magazine Monday, Trump also cited the reliance China and Japan have on the strait for their oil supplies, while claiming the US dependence on the strait has receded.

"Other places get such vast amounts of oil there," Trump told Time. "We get very little. We have made tremendous progress in the last two and a half years in energy. And when the pipelines get built, we're now an exporter of energy. So we're not in the position that we used to be in in the Middle East where ... some people would say we were there for the oil."

Trump "feels the need to remind other countries that they have a stake in this part of the world and they need to take the threat seriously," Matt Reed, vice president of Foreign Reports, told S&P Global Platts Tuesday. "The White House sees this as an international crisis that demands an international response."

Two tankers were attacked last week just outside the strait, with the US, UK and Saudi Arabia blaming Iran. A similar attack off the eastern UAE port of Fujairah occurred a month earlier. Iran, which previously threatened to shut down traffic through the strait if its oil exports were blocked by US sanctions, has denied responsibility.

In his interview with Time, Trump depicted the attacks as "very minor," and on Tuesday, and Larry Kudlow, director of the White House's National Economic Council, told reporters that Iranian threats and actions have had "no impact" on oil prices.

ICE Brent front month futures settled Tuesday at $62.14/b, up $1.20/b from Monday. The contract has climbed $2.17/b since last Wednesday, before the tanker attack.

But that price jump was largely due to the US-China trade dispute and uncertainty over future talks and the impact of tariffs on the world economy, said Sara Vakhshouri, president of SVB Energy International.

"Historically, the oil prices would react to such an incident in a very hypersensitive matter," Vakhshouri told Platts. "This time, the market has kept its calm which is historically very ununusual. US shale oil production, export capacity and a high level of inventories gives the market the signal that there is enough supply."

Still, on Monday, the US Defense Department announced that about 1,000 additional troops had been authorized for "defensive purposes to address air, naval, and ground-based threats in the Middle East," according to statement from Acting Secretary of Defense Patrick Shanahan. Trump announced Tuesday that Shanahan was not pursuing confirmation as permanent defense chief and said Army Secretary Mark Esper would be the new acting defense secretary.

The UK is sending 100 marines to the Persian Gulf to police the Strait of Hormuz and Saudi energy minister Khalid al-Falih said that Saudi Arabia would do "all that is necessary to ensure safe passage" of oil shipments through the oil and gas shipping chokepoint.

Brian Hook, the State Department's special representative for Iran, plans to meet with European counterparts next week, according to sources. Hook is also scheduled to appear before a House Foreign Affairs subcommittee Wednesday for an oversight hearing on the administration's Iran policy.

The US withdrew in November from the nuclear deal with Iran and reimposed sanctions aimed at bringing Iranian oil exports to zero, allowing waivers for Iran's biggest crude and condensate buyers to expire last month.

-- Brian Scheid, brian.scheid@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com