How to get through the Strait of Hormuz

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1:03Right now, as we record this show, Tuesday, April 14th, around 2 p.m. Eastern, Iran and the U.S. are still blocking marine traffic from leaving the Persian Gulf. We have no idea how this is going to play out. But we do know that it will have huge implications for the global economy. And for this guy. Testing one, two. Okay. It's recording. Who are you and what do you do? Christian St. Clair. I'm the production manager at Fantagraphics Books. Yes, books, but hold on. This is not a show about the Planet Money book. It's about two books that Christian from Fantagraphics has been working on that are weirdly connected to the war between the U.S.

1:47and Iran. I first called Christian a little over a week ago, just before the ceasefire was announced, and he told me about the books in question. One is Roberta Gregory's Bitchy. It's a collection of kind of feminist comics. And then another one is Adventures into Weird Worlds. The books were printed in India, and Christian got word in February that they were on schedule to be put on an enormous and very, very hot pink container ship called the One Majesty and would get to the U.S. in early April. Right on time for a book launch party. And then the war started and Iran effectively cut off these skinny waterway ships used to get in and out of the Persian Gulf, the Strait of Hormuz.

2:32Not too long after, Christian was at a production meeting and a colleague asked, Do any of our books go through the Strait of Hormuz? And I was like, no, I don't think so. I was like, you know, they usually just go straight through the Suez. And yet, a couple weeks later, Christian was wondering about the status of those books, and he googled the name of the bright pink ship, the One Majesty. I just thought it would, like, show up on Vessel Finder like it always did. But? But I just plugged it in again. Only this time, it's like, you know, it's like, Ooga, One Majesty has been attacked in the Strait of Hormuz.

3:08And I was just like, oh my God, you've got to be kidding me. Christian learned that the crew was safe. The cargo, too. Apparently, the attack left the ship with just a small hole in it. But it was not going anywhere anytime soon. It was stranded in the Persian Gulf. And Christian, sitting at his desk in Seattle, he knew these books were not a big deal in the grand scheme of things. There was a war going on. People were dying. Iran's blockade of the strait had cut off 20 % of the world's oil supply and other important commodities like helium and fertilizer. Now, for Christian, like many of us, the experience of the war has been kind of removed.

3:47We've mostly seen it at, you know, the gas pump. Christian has seen it with these books, which he kept checking on every day by looking up the status of that bright pink ship. For a long time, if you looked up that particular ship on the marine tracking websites, it just kept pushing out the arrival date by day, even though you knew that was not going to happen. And, you know, and it's still literally showing it in the Strait of Hormuz. And then I just checked it and it now says, like, the ship is location unknown. Ain't that a metaphor. Hello and welcome to Planet Money. I'm Nick Fountain. As we tape this show, U.S.

4:30warships are continuing their blockade of Iran. Iran still controls the Strait of Hormuz. And a big portion of global commerce is still stuck. Cut off. Today on the show, we're going to focus on a key sticking point between the U.S. and Iran, the future of the Strait of Hormuz, and ask, how have ships been getting through the Strait? What does Iran's control of it mean for the global economy? And what's happened with Christian's books and that bright pink ship?

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5:43They've attacked ships that try to pass without approval. And recently, they've insinuated that one part of the Strait, the part near Oman, is not safe. Like, maybe there are mines? Which means captains have to go right by Iran's shores to get through the Strait, effectively creating a choke point for the global economy. Last week on Tuesday, when President Trump announced a ceasefire, he said the Iranians had agreed to completely open up the strait. But the next day, the ships in that area got a very different message. Attention all vessels in Kurs and Goluban, Omansee. Transiting in the Strait of Hormuz is closed yet.

6:24Transiting in the Strait of Hormuz is closed. If any vessels try to transit without permission,

6:36they will be destroyed. Which was kind of a clue that some ships were able to get through with permission. Maybe this was a way out for the bright pig ship. I wanted to figure out how that permission works. How do you get it and what does it cost? So I started calling around. Hello? Yes. Who's speaking? This is Nick Fountain. I just messaged you. I was honestly kind of surprised to get Hamid Hosseini on the phone. He's not a government official, but he is very well connected in the oil and gas industry. He's a spokesperson for Iran's oil, gas, and petroleum products exporters union, OPEX. Where are you located these days?

7:20Are you in Tehran? Yes, I'm in Tehran. And how has the last month and a half been for you?

7:38Hamid seemed relieved for the ceasefire, excited to be a little less on edge. What do you do for fun? Fun? I play football. Football? Are you good? What is your record? All our players are more than 40 years. We are old men. We are not young people. You're the old guys. We play with old guys. All right, but back to the Strait of Hormuz. Hamid confirmed, yes, there is basically a toll system. In fact, he said just the other day, a friend of his, an Indian guy, went through the strait and told him how it works. The friend had a ship full of oil, and that ship had been stuck in the Persian Gulf since the beginning of the war.

8:17But he wanted to get it out. He wanted to get it to India. So the friend got in touch with the Indian government, who helped him broker a deal. He explained to me that he contacted the Revolutionary Guard to the SEPA Navy. Okay. The SEPA Navy is part of the most powerful military body in Iran, an organization called the Islamic Revolutionary Guard Corps. Okay, I contacted them and informed them I am interested to pass the hormones. Pass through the strait, yes. Hamid's friend got word that it was possible. But first, he had to send some information. Like ship name, country that it's flagged, where it's headed, what's on board, who's on board.

9:06Hamid said the Iranians were mainly checking to make sure the captain and the crew weren't from the U.S. or Israel or Iran's other adversaries. And that the ship and cargo weren't affiliated with those countries, too. Though he said, as far as he knows, the Iranian authorities were not verifying who was on the vessels by boarding or sending drones. For Hamid's friend and his ship, everything checked out. They checked everything about personnel, about vessel, about flag, about owner, about destination of the cargo. Then they checked everything. Then they approved. They approved. But his friend's ship could not pass yet.

9:44First, he had to pay a toll. Before passing, ask him to pay for each barrel, one barrel, one dollar. Hamid's friend told him the ship had to pay one dollar per barrel of oil. And keep in mind, these ships, they are big. Very large crude carriers, or VLCCs, carry two million barrels of oil. So these tolls could be as much as two million dollars each time. But Iran does not want to be paid in dollars, Hamid's friend told him. He told me pay by crypto. Crypto? Yes. Very limited time. They gave him very limited time. Only five seconds. Five seconds? Give him an account. Five seconds, you must pay.

10:32There are a couple reasons to not use dollars. Crypto helps everyone avoid U.S. sanctions and also lets the Iranians move the money quickly. Five seconds is extraordinarily quick. Was that an exaggeration?

10:49Hamid says his French oil ship sailed through and made its way to India. So you got this information from a person who had an oil tanker.

11:02Hamid told me his contact at the Iranian Sefa Navy said, this is the system. I asked Hamid to connect us with his Navy source who gave him this info. He wouldn't. Same too with his Indian friend with the oil tanker. Before I let Hamid go, I told him about Christian and the comic book stuck on the bright pink ship in the Persian Gulf. And he was like, oh, put us in touch. Maybe can help him. Maybe can help him. If we've information, maybe we'll be able to help him. Seriously? Yes. If destination was not USA, Asian country, no problem. Destination is New York City. New York City. Maybe let me see what will happen.

11:49Basically, Hamid is saying, since the ship is going to the U.S., Christians only hope might be successful negotiations between the U.S. and Iran. Okay, stay safe, and thank you so much for the time. Bye. Thanks, J.D. Okay, bye-bye. So it seemed unlikely that Hamid could help Christian and the bright pink ship. I also tried reaching out to the shipping company that owns the One Majesty, and they said they wouldn't comment on the status of the ship. But there was one person I wanted to check with. Am I coming through your headphones? Yes. Perfect. Let's do this. Who are you and what do you do? Ryan Peterson, founder and CEO of Lexport.

12:28We've had Ryan on the show before, and the reason I called him is because his company is at the center of global logistics and shipping. They have containers going every which way at any moment. He has sources at every major shipping company. He is very keyed into this stuff. I asked Ryan, hey, do you know what's happening with the bright pink ship, the One Majesty, the ship that might have Christian's books on it? And he was like, no, we do have some containers stuck in the gold, just not on that ship. But he did have some info for Christian, and it was not good. Apparently, when a ship is damaged, like the bright pink ship was, the ship owner might use something called the Law of General Average.

13:09And what General Average says is that if there's damage to some cargo on the ship, it's shared equally across all of the people who have cargo on the ship. So you all share in this together, including damage to the ship itself. It's actually you as a customer of the ship are liable and you're on the hook for that damage. The law makes sense in that if there's a disaster on the high seas, the last thing you want is the sailors, the captain thinking about which cargo to throw overboard in order to save the ship. You're just like, just throw the cargo overboard and we'll figure it out later. Which means Christian and his comics publisher, their insurance company, could be on the hook for damages sustained to the bright pink ship.

13:53But while we had Ryan on the line, might as well ask him the big question. What does a potential tollbooth in the Strait of Hormuz mean for global shipping and the global economy? He was like, well, on one level, it might just mean one more fee that makes everything a little more expensive. But also, it might mean a huge shift. because for 70-something years, the U.S. Navy has been guaranteeing the free flow of goods throughout the world's waterways. We really kind of take it for granted that anybody can just sail anywhere and nobody's going to attack your ships and there won't be pirates and other countries' navies attacking you.

14:36But this is a pretty new phenomenon. And so this is a huge challenge to that order, which says, well, maybe the U.S. Navy can't guarantee freedom of navigation anymore. How important is this freedom of navigation, freedom of the seas for global commerce? It's the heart of globalization. And so it's global commerce. On some level, it's the modern world that we're all used to. Yeah, the modern global economy requires the free flow of goods around the world. And that is in the balance right now. Which might explain why the Trump administration has made opening up the strait a priority in their negotiations with Iran.

15:16And responded with their own blockade to prevent ships from going to and coming from Iran. Because freedom of the seas is such a big deal. I mean, it would be a really big deal if you had a state in Iran that is now able to kind of dictate terms to the United States of America as the end of American order. Like, that's the big deal. Like, the dollar value of the toll, like, doesn't really matter. But if you're saying, hey, the U.S. Navy is no longer the big boss of the seas, like, wow, that really changes quite a few things, I think would cause a lot of companies that are thinking in a big systems, big picture kind of way to say, hey, maybe doing global long distance trade is too risky.

16:03Maybe we should think about regional supply chains. Maybe the U.S. American companies start thinking about manufacturing in Latin America or even back in the U.S. And that would be an enormous shift. Speaking of enormous, after the break, an update from Christian on his books and the bright pink ship. He's got some news.

16:29This message comes from Capital One. Capital One offers checking accounts with no fees or minimums. What's in your wallet? Terms apply. See CapitalOne.com slash bank for details. Capital One N.A. Member FDIC. This message comes from Grainger. For the ones who get it done, Grainger offers the professional-grade products you need to get the job done. With fast delivery and access to technical product experts ready to help you meet any challenge. Call, click Grainger.com, or just stop by. This week on Up First, the Trump administration and Iran do not have a peace deal. Now the president says the Strait of Hormuz is under a U.S.

17:09blockade. What that means for the ceasefire in Iran remains to be seen. And what it means for gas prices, those will likely continue to climb. Follow the latest developments. We'll have them every morning on Up First. Listen on the NPR app or wherever you get your podcasts. Hey, how's it going? Good. How about you? Good. A few days after I first talked with Christian, the comics guy, I got him back on the line. I was excited to tell him about all I'd learned. The bad news about the law of general average? about what I'd learned about the tolling system from Hamid and his sort of offer to smooth things over.

17:47But before I got to any of this, Christian told me that he had news. The books all this time were in India. What? Yes. Apparently, the books were in India. Christian had thought that they'd made it onto the bright pink ship, the One Majesty, but that ship got waylaid in the Persian Gulf. The ship never even made it to India. So the books never got loaded onto it. They were never on the ship? No, they were never on the ship. Ah. What a relief. Yeah, no potential toll fine. No toll, no law of general average, no blockade. In fact, just the day before, the books have been loaded onto a different ship.

18:34Also bright pink. Apparently that's the vibe of the shipping company. The ship has officially set sail. They're on their way. Yes. Incredible. He says he's hoping the books will only go on sale about a month late. If this current sailing schedule holds, which I am pretty confident at this point it will, mid-July. You're confident in anything in global shipping at this point? Well, there's only so many things that can go wrong with one particular book, so I feel like these books have exhausted that. Negotiations between the U.S. and Iran broke down over the weekend. And a big sticking point is the future of the Strait of Hormuz.

19:14If and when negotiations start back up, there are kind of four main options for the strait. An open waterway with no tolls. A toll booth where Iran gets the tolls. One where the U.S. gets the tolls. Or, I don't know, one where they split them. All we do know is that the fate of global commerce and the global economy kind of depends on how it all shakes out. Hey, fellow Southern Californians, Thursday, the 16th of April, a.k.a. this week, Sarah Gonzalez, Jack Corbett, Alex Mayasi, myself, are going to be with a very special guest live on stage chatting about the Planet Money book. And there's also more tour dates throughout the rest of the country and one even in Canada that should be equally as cool.

20:01This episode of Planet Money was produced by James Sneed. It was edited by Jess Jang, fact-checked by Sarah Waters, and engineered by Kweisi Lee. Alex Goldmark is our executive producer. I'm Nick Fountain. This is NPR. Thank you for listening.

20:24or minimums. What's in your wallet? Terms apply. See CapitalOne.com slash bank for details. Capital One N.A. Member FDIC.