Iran war and the toll on Asia

Asia is paying a heavy price for the war launched on February 28 by US President Doanld Trump. Countries belonging to the Asian continent buy 90 per cent of the Liquified Natural Gas, LNG, that the Middle East produces. That flow of LNG has been severely disrupted by the war in the Middel East. This disruption will show little sign of easing until at least 2028 when a wave of US gas production is expected to bring new supplies.

Asia's biggest economies – China, Japan, South Korea, India and Pakistan – and emerging markets like Vietnam and Thailand – all rely significantly on LNG for power. This unexpected disruption threatens the region's industrial and agricultural output and may undermine its willingness in the future to rely on this fuel to power its growing energy needs. Most affected in the continent would be the area's very poor citizens. Doanld Trump, not given to deep thinking, did not reflect on these developments when he decided to attack Iran.

Signs of squeeze are already appearing. Countries across the continent that can, are switching to oil and coal-powered electric generation and in some cases aggressively curtailing consumption. Some nations with ample coal-fired power plants can pivot relatively quicky. A Wood Mackenzie analysis shows that in South Korea, which imports almost a fifth of its LNG from the Middle East, increasing use of its coal plants allow it to fill its entire gas gap until the coming summer. In Japan, coal could offset up to 70 per cent of gas-fired power generation.

The retreat to the use of coal as a source of energy risks derailing decarbonisation timelines and climate goals. Coal releases twice as much carbon dioxide as natural gas. India is another large importer of Middle Eastern LNG that is likely to convert to the use of coal which is abundantly available in the county. The government in New Delhi has issued directives to maximise coal-fired output, ordering coal plants to operate at full capacity for three months starting in April. This is a major reversal to the commitments it made to reduce the amount of carbon dioxide it released into the atmosphere.

China is another large Asian economy that is making the switch to coal. Like India, it has huge domestic reserves alongside gas piped in from Russia. Like its neighbour, Pakistan, India also has solar plants to which capacity would be added. Analysts are impressed with the large role renewable sources of energy are playing in Pakistan. In a section in its issue a few months ago, British newsmagazine The Economist analysed the impressive expansion of solar energy in the country. This was due to the cheap solar panels it was able to procure from China, the world's largest manufacturer of these panels. Close relations with China are helping Pakistan to deal with this crisis.

However, notwithstanding these moves, the shortages would be felt by poor households. In India and Pakistan, a shortage of LNG has left millions of households unbale to cook daily meals, forcing the closing of thousands of small businesses and restaurants.

"It's significant tightening of the market – we're talking reduced production until the end of the decade," said Henning Gloystein, managing director for energy at Eurasia Group, a political research firm. "In Asia, in the next week, that's when the actual impact, the physical impact, of nondelivery will begin to happen," he said. Until now Asia has been shielded by a buffer of cargoes from the Persian Gulf already at sea before the closure of the of Strait of Hormuz. But the last of those ships arrive in the closing days of March and early April .

"Basically, when there's less supply in the market, that means demand will need to come down," said Daniel Toleman, a research director for global LNG at the energy consultant Wood Mackenzie. As a first resort, "what we're going to see are countries switching to other fuels wherever is possible."

For importers of LNG, the fundamental calculation has changed, said Gloystein in an assessment of the situation he issued after Trump's war on Iran. "Anybody at the moment who is in a country or a company that has plans to do gas-fired power stations is going to have to review these … There is going to be no return to normal, even if the war ends," he wrote.

On April 1, Doanld Trump spoke to his nation and the world in an advertised speech in which he was expected to indicate the time line for the end of the global crisis that he launched on February 28, with the attack on Iran. He spoke for half an hour but covered the ground on which he had traveled numerous times before.

Before concluding this assessment of the situation created by Trump's Iran attack, I should briefly refer to the role Pakistan is playing in resolving this crisis. It hosted a meeting of some large Muslim states in its neighbourhood to discuss the crisis and reflect on whether they could intermediate and have the Trump government and the new regime in Iran conclude some understanding that would lead to the end of the war in which the United States acting with Isael had done a great deal of dagame to Iran. The two aggressors had hit thousands of targets in Iran, severely damaging its economy. The bombing had also targeted the leadership groups in the country, killing dozens of senior leaders. This killing had brought to power a new regime whose members were not known in the West. Regime change was one of the motives behind the American-Israeli attacks but the hope was that it would happen by a popular movement, not by killing the leaders by bombing.

Iran showed that, in spite of the intense bombing by the United States and Isreal, it retained the ability ty to do harm to the aggressors. On April 3, it was able to bring down two American fighter planes. There were three men on board; they were able to eject as the planes came down. Two of these were rescued by the Americans while the third was missing. An extensive search for him was going on as I write this.