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Trump Says The Strait Is “Open.” So Why Isn’t Anyone Moving? (w/ Sal Mercogliano)
00:26:19
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A
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Early birds always rise to the occasion for summer vacation planning because early gets you closer to the action. So don't be late. Book your next vacation early on VRBO and save over $120. Rise and shine. Average savings $141. Select homes only. Hey everybody, this is Andrew Egger with the Bulwark. A couple of weeks ago I was able to sit down on here and talk to Sal Mercogliano who is shipping expert, YouTuber extraordinaire. He runs the show what's Going on with Shipping. He's a former merchant mariner, he is a mar historian. He's the best guy basically to talk about everything that's been going on in the Strait of Hormuz. I don't know if you people have noticed, but the Strait of Hormuz has remained in the news. We are one day or not quite one day into Donald Trump's ceasefire with Iran. It is a so called ceasefire. The firing has not yet ceased, but we at least have the sort of principles of a ceasefire and everybody is waiting with bated breath to figure out exactly what is going to happen to shipping in the Strait. What's going on already with it? What is going on with shipping. So I'm very glad that Sal is back on to sort of talk me through what the very early going under this ceasefire looks like and what might be likely to happen next. So Sal, thank you very much for coming back on.
- [01:47]
B
Thank you for having me, Andrew. I'm hoping I can live up to that because it's kind of hard to tell exactly what is happening right now regarding shipping.
- [01:53]
A
Well, yeah, I mean, people, people, you're going to want to watch this one fast because who knows how long anything we have to say today will, will remain current because the, I mean people, it is really hard to overstate just how destabilized everything seems to be right now. So let me just start right there, Sal, because we keep hearing, I mean US Officials have been basically saying mission accomplished, the Strait is open. We're going to have this two week period of ceasefire and we don't know what's going to happen after that. But at least so far so good. And then we keep getting these sorts of reports from the ground suggesting maybe the opposite is true. Maybe there hasn't been much difference at all between the strait yesterday and the strait today. Or maybe it's partially reopened. Can you just walk us through? Like from the point of view of one of these vessels that's stuck there right now, it's been stuck there, really wants to get out of the fricking Strait of Hormuz. What has this ceasefire deal meant? Like what are they hearing and are they, how are they approaching it?
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B
Yeah, well, I put it this way, Andrew. I mean this morning we had Secretary Hegseth come out, talk about the fact that, listen, the straits open. He was asked this multiple times at the press conference. We had the press secretary come out for the White House, say the strait is open. That would tell me, I would expect to sit there and watch on my marine traffic that, you know, ships would bolt for the straight of horror moves if they had the opportunity. They would go, that's not what's happening. What we're seeing is a very measured kind of the same amount of shipping going through that we've seen so far. And more importantly, what shipping is going through is either Iranian shipping or linked to Iran in one way. They're going through what we call the toll booth, which is that area of sea between the Larrack and Kishim island within the Iranian territorial waters. So we're not seeing any appreciable difference right now in that for shipping firms they're waiting to get some sort of confirmation. They need something firm that they're not going to get shot at, that they're not going to endanger their ships and their crews. And they don't have that yet. They don't have it from the Iranians because the Iranian statement that came out talked about having to coordinate through Iran. So not exactly clear whether you're going to have to go through the toll booth to exit the Strait of Hormuz, if you're going to have to coordinate with them. We had a ship heading for the Strait of Hormuz and head out but turned back around. We've seen that happen multiple times in the past. So right now it's really status quo. Everything has kind of gone back to where it is. No indication that the US is moving any forces into the Persian Gulf to declare it open. And you know what we haven't seen is any ship go through the center of the Strait of Hormuz, which is the traditional area. We've had ships run the southern end along the Omani coast a few days ago, but more ships are running along the Iranian coast than before. So really no change in what we've seen.
- [04:30]
A
Yeah, this is the thing that I've been struggling to get my head around because, you know, we had last night Iran sort of declare it, you know, open asterisk. Right. And there were a lot of reasonable things like, wait, is this actually any more open than we have already seen? And then today, in response to sort of additional Israeli attacks in Lebanon, we had Iran say, actually the strait is back to being closed. But again, like, it is hard for me to even think of a single way in which today is closed is actually quantitatively different than yesterday's open with an asterisk. Right. I mean, like, is it. Are there, Are there, Are there any differences between, like, the status quo that was in place two days ago and the status quo that was in place overnight while. While the ceasefire was supposedly in place and the status quo that is in place right this minute as we're recording?
- [05:17]
B
The only thing I would. I have noticed is a couple of ships have moved closer to the Strait of Hormuz from inside the Persian Gulf. So you see a little bit of a shift of movement that way. Maybe they're waiting for that, you know, notice that they can go. So, you know, kind of like edging for, you know, for the gates to open at a concert. That's kind of what you're seeing right now, but really not much more than that. And again, one of the things that's really important is some countries have been working with Iran to do this. So China, Malaysia, India, Pakistan, they've been able to get ships out. We've seen recently, France has been able to get a couple of their container ships that were trapped out. So we're seeing those kind of individual agreements being done with Iran. We don't know any of the details. Nobody is talking. None of the shipping firms, none of the countries are talking about. What's the quid pro quo to get your ship out? Is there a toll? Are you paying something? Is there some sort of agreement, you know, with. With reciprocity or exchange of things happening? We just don't know. But the most damning thing, I think the most dangerous thing I get concerned about is the statements by Iran declaring their control over the Strait, along with potentially Oman, that, listen, we're going to control access in. And that is in direct violation of a specific article in unclause, the UN Convention of the Law of the Sea that says you cannot control a strait even within territorial waters. You can't do it. And I got to highlight this. The straight horror moves is not entirely in the, in the territorial waters of Iran. It's not. So they have no justification to do this. They try to make analogies to Panama Canal and Suez Canal, but they're canals. They require maintenance, they require pilotage, they require, you know, they require other things. This is an international strait, and you're keeping out sovereign nations from being able to trade, trade on the open ocean. And my fear is how much the Trump administration is really willing to acknowledge Iran's control of that. They're not really pushing back on this at all, which to me is a big problem. I mean, it's literally surrendering to freedom of the seas.
- [07:10]
A
Yeah, yeah. I mean, you mention not only potential Trump administration permission or like, you know, kind of like tacit approval of this happening. I assume you saw this morning, Trump was on the phone with ABC's Jonathan Karl, and he said something that, I mean, came out of completely out of left field, at least as far as I'm concerned, where he was saying, Jonathan Karl was asking about that specific thing. Is the US Going to allow Iran to just sort of like, grab hold of this and not let go? And Trump said, well, in fact, we're actually talking about maybe it being sort of a joint thing. You know, America and Iran both sort of like, you know, maintaining the strait and collecting these tolls. I mean, you have any kind of reaction, what's your reaction to that somewhat surprising statement from the President of the United States?
- [07:58]
B
I watched and read Jonathan Karl's talk with him, and I'm just, I'm floored by it. I mean, there's no legal justification for it. Again, you know, and while President Trump will be joking at times and make like, comments, this is a really significant comment because, again, one of the tenets that the US has been, I mean, from the foundation of the United States is this concept of freedom to seize. Some of the very first wars we fought were against paying tribute, I mean, to either France in the, in the Quasi War or the Barbary States and everything. We're going way deep here, Andrew. I apologize. This is a deep historical one here in bulwark for you. But we want it.
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A
We can't get enough.
- [08:33]
B
This is one of those kind of core tenets. It's like, you don't do this and the concept that the US in conjunction with Iran would do it is just completely unbelievable. Again, you know, this is the sovereign nations. We're talking about Iraq, we're talking about Bahrain, Qatar, Kuwait. They have access to the sea and they're being denied that. And again, this is economically hurting not just those countries, but everyone. I heard Secretary Hegseth this morning give a talk and sitting there saying, listen, we don't get anything out of the Persian Gulf, again, fundamentally wrong. Eight and a half percent of every barrel of oil we import into the United States comes from the Persian Gulf. So I mean it's significant, it's significant in the impact it's going to have on the global economy. And again, you know, New York Times came out with a story today, talked about the fact that, listen, this was not even in the planning cycle for opening the Straits, cuz they didn't expect the war to last very far. If you look back in June of 2025 when they executed the operation against Iran, we saw a slight dip in traffic that came through the Persian Gulf, but nowhere near what we saw happen here with almost a complete and total lockup. And again, what we're seeing flood social media over the past week was like, hey, traffic is back to normal. It's anything but. When you just hit double digits, you know, 10 to teens in terms of ships going through, that's a fraction of what 138 ships a day was doing prior to this.
- [09:54]
A
So you've just gotten into a lot of the economic impacts there, which is obviously the undercurrent of all of this or the subtext of this entire conversation. I wanted to ask about this because we've seen all these problems already kind of arise today. We've seen these questions of whether there has been really any breakthrough through functionally on the ground at all. And yet despite that, when the ceasefire was first announced last night, we really did see markets breathe this giant sigh of relief. The price of oil crashed back down to still levels that are far above what they were before this whole boondoggle, but the lowest we've seen in quite some time. And then they have kind of hovered flat in the 20 hours or 18 hours or whatever it is since then. We have not seen a lot of major motion even as all this stuff we have been talking about, about all these ongoing problems have, have sort of bubbled up. What do you make of that? I mean like, are markets sort of pricing these, these things that we're talking about as like temporary snags on the way to smoother sailing through the strait or what's going on there.
- [10:53]
B
Number one, I think the Trump administration, you know, timeline on this was geared to what was going to be the big problem, which is this, that a ship that sailed from Saudi Arabia on February 28, the day the war started, is going to be arriving in Europe the next day or two and then after that there's no ships behind it. And that was the problem. I think they're trying to offset what's going to be the physical shortage of oil and other materials that normally would be arriving at the docks in Europe, in Australia and in the Americas. It's already hitting in Asia and we're already seeing it. And so I think that's what that control is. And again, the oil market responds to what they foresee is going to be the future. Listen, oil is going to be stabilized because it will reopen up the strait. But I have to say that even if today you had the new president of Iran, the Ayatollah Bibi Netanyahu and President Trump get together, damage has been done. I mean we have had five to six weeks now, 40 days roughly of drought coming out of this region. And we've created this massive bubble in the supply chain. It's going to take 40 weeks to put that back together than revise 40 days. We've done the damage and what you're seeing is a lot of damage control being done. What can we do to kind of offset that? Because again, what we're going to see is that long term implications, some of it we're not going to see right away because things like fertilizer, the fertilizer shipments may not be there, but you're not going to see the impact of that till a growing season goes by and we see lower yields or you know, a chip factory making microchips doesn't have the helium necessary to produce the next run. Or the fact that 20 car carriers are stuck in the Persian Gulf and that means car distribution is going to be impacted. I mean all of that is kind of phased. Oil always tends to be a very quick reaction. I would argue you got to look at the longer term here and that's what we're seeing right now.
- [12:40]
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- [13:58]
A
I wanted to ask too again, like we're spending a lot of time on like the not small prospects of this all going worse than it's been advertised, right? I wanted to ask a couple questions on the other side of it, which is, which is maybe like feeling out what the best case scenario of this cease fire, such as it is, have, have, have presented. So assuming for instance that, that the toll booth remains in place that Iran is trying to, I say best case scenario. Obviously it's still a bad scenario in a lot of ways of just, just the best case scenario in the sense that the strait actually does reopen. So like, like just, just let me present you with this, this possibility that the strait actually does reopen. Iran, you know, is basically saying come one, come all. But you still actually do need to coordinate with us. You still need to like you know, comply with these sorts of checks and things like that, that in sort of whatever way we see fit. I just kind of wanted to ask what would it look like for Iran to try to carry out an operation like that at anything like the levels of transit that were happening before this? I mean, does Iran even have the capacity to, to you know, perform those sorts of tasks if you know, setting aside the question of whether we or anybody else is going to let them. But like what would a like sort of fully, fully functioning Strait of Hormuz under the sort of like newly muscular control of Iran's Revolutionary Guard Corps look like in practice?
- [15:22]
B
Well, I think number one is you don't ever get back to the level you were at previously, because I think no one's going to go back full force, 138 ships a day because they're going to sit there and go, wait a minute, this could crash tomorrow. This is, this, you know, why am I going to get myself involved in this trade when I may have a potential to go other places? So I think, number one, you permanently hurt the level of transport through there. You get countries like Saudi Arabia and others who are going to sit there and go, okay, what are we going to do to bypass this? Do we need to build more pipelines? Do we need to create a more well rounded transportation system that avoids the Strait of Hormuz? What kind of resiliency can I build into this system? And again, you know, it's surrendering to Iran control over strait. Now I'd argue we've kind of did that with the Houthis in the Red Sea to a point. We tried to knock them back and found out how difficult that was. But then it opens up, well, wait a minute, if Iran could do that for Hormuz, can Spain do that for Gibraltar or Morocco, or can Indonesia and Malaysia or Singapore do that for Malacca? Can the Danes and the Norwegians and the Swedes do it for the Danish Strait? It really, you know, can the US And Cuba do it for the Florida Channel? I mean, it creates a really unique parallel here where all of a sudden control of the seas becomes this kind of avenue you can use to generate revenue. And, and the question becomes, does Iran become more powerful and influential by controlling trade and transportation than they ever were before, than potentially having a nuclear weapon in their hands? And again, you know, this seems to be an issue that the Trump administration is not really placing it on very high priority. You know, it's targeting the administration, it's targeting the military, it's targeting the nuclear weapon program, but not the straight of whore moves. And I would argue that's a fundamental problem. So I just don't think we ever get back to the level we do. And it would also raise the question of, well, if you're a country like Bahrain or Qatar or Kuwait, do you start building a navy to start protecting your ships going in? Do you start looking for alliances? Do you start maybe, hey, with the US we're going to go back to those, those, those escorted convoys to go back through. Do you go to China, for example? Maybe I need to ally with China because China has a good relationship with Iran or Russia. You know, again, you start creating this kind of polarity on the world's oceans that we really hadn't seen where previous to this. You know, hey, it doesn't matter what flag or registry you are. You can sail anywhere on the blue Water and trade that's going to change. And I think that's the fear that we have this emergence. And again, the growth of the Dark Fleet comes into that.
- [17:49]
A
The other element of just sort of the economics of the, of the toll booth is probably worth talking about a little bit. I mean, it's sort of a black box so far at least. My understanding, maybe I'm wrong, you correct me. My understanding is it's sort of a black box what Iran has actually been getting out of the ships that it is letting through right now. Like, we, we are assuming it's something, but we really don't know. But, but at least in terms of what it is demanding going forward in, in the demands that it is put forward, that's not a black box. Right? I mean, they're, they're actually saying we want to be able to take a cut of, of, you know, every gallon of oil. You know, a dollar for every barrel of oil or something like that. I think I saw reported this morning of everything that transits the strait. I mean, can you just give us a little bit of perspective about what a windfall like that would actually sort of look like functionally relative to sort of like the economy of Iran?
- [18:38]
B
Yeah, I mean, it's a massive windfall for them. I mean, Financial Times had the story where they were talking about that maybe a dollar, a barrel of an oil tanker coming through. Two million barrel oil tanker, $2 million. You know, and this is generating, it's generating revenue for them. Because if you're looking at 10 million barrels per day, you know, coming out, or 20 million barrels if they're back up to full capacity at the Strait of Hormuz. Talk about serious money. And you know, this can be a replenishment for them. You know, it could help with the rebuilding and restructuring of Iran. And if you're in the United States, you gotta be worried about what are they gonna use that money for. Are they gonna go build, you know, civilian projects or are they gonna talk about funding their missile program, their nuclear program? And again, you're really putting in the hands of, of a nation control over an international waterway that they're trying to monetize for that use. Again, this is not Suez and Panama where you have locks and gates and, and pilots and dredging that have to go. You're just using your advantage position here to exert control over the waterway and I think again, it has a long term negative effect on our ability to move goods around the world. And again, arguably we've been seeing this for quite a long time. This, this bifurcation on the world's oceans, this breakdown on freedom of the seas. And that's exactly what you're seeing here.
- [19:52]
A
We've obviously talked a lot about the destructiveness of President Trump and the United States of America, in theory being willing to let Iran get away with sort of choking off this strait. What about everybody else? I mean, it's not our ships that are actually directly impacted in terms of this transit. Obviously it's global supply lines where we are integrated into those in a lot of different ways. But are there other sort of international efforts brewing to sort of head off the possibility of an Iran controlled straight, or is everybody else still just kind of like standing around slack jawed watching this unfold and we'll see that sort of thing later, if at all?
- [20:32]
B
Well, I think initially what you saw was just kind of really, you know, you know, anger at President Trump and Israel for executing this war. And I think everybody else thought too, this may be a quick conflict and everything goes back to normal as it is. Well, that's not happening. We saw the UK Prime Minister convene a council, about 30, 35 nations together to talk about this. I think it's significant, I really do think that the European Union, Asian nations and other nations really need to start being serious about this discussion about, okay, listen, we have a disagreement with President Trump. We don't agree with him, but however, the Strait of Hormuz is absolutely essential for the global economy, including our ships and the cargo that we need. This is absolutely a priority for it. And what's happening is if they don't get themselves organized, what we're seeing is countries like India, Malaysia, Pakistan negotiating separate deals with Iran. That's going to put them into a position to control it. I mean, ironically, again, you know, the European Union's trying to weed itself off of Russian energy. That's going to be a really difficult thing to do if all of a sudden it can't access energy out of the Persian Gulf. And that's going to put themselves in that position of okay, we're going to, we want to end liquefied natural gas importation in 2027 from Russia. Well, we can't do that now because we can't access, you know, Qatari liquefied natural gas or there's not enough American liquefied natural gas to go around. Or Australia just got hit by another cyclone and knocked out some of their production. I mean, this is gonna really put the rest of the world have to put aside. You know, okay, I disagree with President Trump, but we gotta focus on the matter at hand here, which is resuming normal trade and not disrupting it. Because, I mean, we're already seeing that the UN is predicting a significant fall in expected growth of GDP and, and national production over the year from 4.5% down to 1 2%. That's going to have a significant impact not just in developed nations, but undeveloped nations around the world. This is going to be harder for nations in Africa, Asia to absorb this hit than more developed nations. And I think that's where this is going to have its greatest impact.
- [22:33]
A
I mean, we've, we've painted a pretty grim macro picture here. I wanted to zoom in real quick on just one little micro element of all of this, which is that last time we had you on, you talked about the sort of humanitarian situation that was, that was facing some of these merchant mariners who were just stuck in the Persian Gulf, you know, unable to leave through the strait, you know, not supplied for like a lengthy, just experience of just bobbing around in the Gulf, unable to leave, not necessarily able to dock to resupply. Can you just give us kind of an update of, of what that situation has looked like in the, in the few weeks since we talked last?
- [23:09]
B
Yeah, I had an opportunity to talk to a mariner who was able to get off a ship. Matter of fact, it was an American able to get off a. They, they, you know, they were working with countries. They found a country they could work with. The UAE was actually doing really well. So the UAE really stepped up here and they were, you know, trying to organize a little bit. It's difficult because of the sheer volume of ships that they're dealing with. They've got limited, you know, pure space. They don't want to bring a lot of ships in pier side because it attracts attention. So I mean, they're trying to allocate resources to them, trying to get fuel and water out there. It's one of the weird things is they had a fuel out there and normally you buy bunker fuel because bunkers fuel is the affordable fuel fuel. They actually bought diesel fuel, which is much more typically expensive, but because of the glut of diesel fuel in the Persian Gulf, they bought that because it was more readily available. It's like putting the premium in your car all of a sudden because it just happens to be there. It's really interesting to see how the Gulf states are working to help that out. But there are issues, I mean, let's be clear, ships are stuck, a lot of crews are not able to get off because of air issues and flights. It's really difficult to get the repatriation of them out there. They want to get home. They're bored. And it's still risk. We're still seeing ships being attacked even now. I mean, we're seeing those periodic attacks happening. It's really kind of, you know, it's a, I would say 99% boredom with 1% sheer terror, you know, when you have these attacks. And I think one of the things that I'm almost sure of and I haven't had any contact today to confirm, but when they heard, you know, okay, the strait's going to open up, things are going to move, that's great. But who's going to be the first one to go? You know, who's going to be the first one to try that? And, you know, they're really looking for the US Navy or some navies to kind of be the ones to step up. I think I talked about it last time with you. If you're on a fully loaded liquefied natural gas carrier which is carrying natural gas, you know, super cooled and under high pressure, you know, and basically it's a floating bomb waiting to go, you really don't want to be the first one to try the Iranians to sail through there. So I think they're just looking for more from the governments, from the US and particularly since the US Is the one who kind of initiated this conflict, they're expecting to see the US Navy kind of sitting there ready to husband them through. And again, this isn't great for the US Navy. If the US Navy is expecting to fight a war in the Pacific, for example, against a country like China among the first island chain. If you can't go against Iran in the Persian Gulf, that's not a great, it's not a great look. And I think really the US has to be rethinking its military strategy right now when it comes to trade and commerce.
- [25:37]
A
All right, on that extremely optimistic and fun note, I think we can probably leave it there. I should say again, you know, we're taping this. I guess it's Wednesday. Is it Wednesday? Wednesday afternoon at like 3pm this has been a, you know, we're less than 24 hours into this ceasefire, a remarkable moving target in terms of, in terms of just the developments that have been coming left and right. I am eager to close my browser window when we're done taping here and see if anything crazy has happened since we started. But, but I'm very again, Sal Mercagliano, basically the best person to come on and talk to us about this stuff. Very grateful to you for taking the time again because we really value your expertise here.
- [26:17]
B
Andrew, I appreciate you having me on and I appreciate everybody tuning in. It's a very, very tough topic to really get a handle on. A lot of misinformation out there again and the last thing is always be thinking about those mariners on those ships out there. I appreciate it.
- [26:28]
A
Yeah, tell the people again where to find you.
- [26:29]
B
Yeah. What's going on with shipping on YouTube? All my contact information is on there. I've been doing pretty much if not D every other day updates on the straight of horror moves. I try to give you the exact data, you know, kind of clean it up, let you figure it out and see exactly what is happening.
- [26:44]
A
Well, we appreciate it, Sal. Thanks for coming on and I should say thanks to all of you out there for watching, for listening. Wherever you bump into this content, we hope you'll subscribe subscribe to the Bulwarks. Subscribe to what's Going on with Shipping, which I think we'll do some sort of fancy YouTube chicanery to get that actually linked to this video as well. So subscribe and we will see you all next time. You know what? It sucks to be bored. But when I get on my phone and play real casino games on spinquest.com, the time flies by. That two hour wait at the DMV seems like 10 minutes. Play your favorite slots, live blackjack, live craps with a live dealer. New players. $30 coin packs are on sale for 10 bucks. Play spinquest.com and you'll never be bored again again.
- [27:28]
B
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