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SPAIN is bracing itself for a major economic shock, as the Middle East crisis escalates and effectively closes the Strait of Hormuz.
Military conflict and drone attacks on commercial vessels have paralysed the critical 34-kilometre wide maritime chokepoint between Iran & Oman.
In the last 48-hours, the Joint Maritime Information Center confirmed that no oil tankers and only two commercial ships have been able to pass through the strait.
The Mussafah 2 was hit by two missiles this week about 33 km off Khasab, killing all eight crew.
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The small vessel attempted to help the abandoned container Safeen Prestige which had been drifting in the Strait of Hormuz after being struck above waterline on March 4.
Normaly, around 20% of global oil flows through this important energy artery. This equates to a loss up to 20,000,000 barrels of oil per day.
Experts now warn that, if the paralysis persists, we could see a similar oil price shock as in 1970s. Prices may even reach $150 per barrel.
This disrupts vital trade routes, and poses a serious threat to fresh produce and meat in areas that depend heavily on imports.
Yolanda Daz, Spain’s Minister of Labour, proposed measures to combat the global economic tsunami that is looming and the inflation threat. These were the last measures implemented during the Covid crises.
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She convened an emergency crisis meeting with the major trade unions, employer associations and other stakeholders to devise preventive measures for the economy and safeguard it.
The government is actively dusting off their pandemic playbook and preparing an array of drastic interventions.
These include the return to ERTE furlough programs and a legal ban on redundancies by companies receiving state financial aid.
ERTEs (Expedientes de Regulacion Temporal de Empleo(), are temporary schemes which allow companies to suspend their contracts or reduce the working hours whilst the state pays a part of their wages.
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Remote working on a large scale is also considered a top priority to counter potential petrol shortages or disruptions in the supply chain.
To stop household bills from becoming unmanageable, the most important proposals are to expand the electric social bonus as well as introduce strict energy price controls.
Diaz, despite the severity of the plans, has called on the public to be calm as the government completes its diagnostic phase.
The minister stated that the meeting was “absolute calm and tranquility”.
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“We are experienced and will repeat it if required.”
The UGT and CCOO, two of the largest unions of workers in the country, are supporting the government’s intervention to save jobs.
But union leaders demanded that Pedro Sanchez, the Prime Minister, personally lead a wider crisis committee.
They also demanded that a report detailing the fiscal impacts of the aid be produced, arguing it is inacceptable to use public funds to bail out businesses who complain later about having to pay taxes.
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Due to military risks, global insurance companies have cancelled coverage of commercial tonnage in the Persian Gulf and Gulf of Oman as well as all Iranian territorial water.
Fuel supplies from the Strait of Ormuz are down 90%. This has triggered an energy crisis across Asia, where bunker fuel costs in Singapore have risen by over 40%.
Kpler data also shows that major Gulf supply chain and container hubs such as Dubai’s Jebel Al are completely blocked.
The Olive Press offers a variety of international affairs news.
