Iran in Oil Route Threat
28 Dec 2011 01:35 GMT
 

TEHRAN - In a new escalation of the nuclear standoff between Ira and the West, Tehran threatened Tuesday, December 27, to block the flow of oil through the Strait of Hormuz if new sanctions were imposed on the Islamic Republi (more)

TEHRAN - In a new escalation of the nuclear standoff between Ira and the West, Tehran threatened Tuesday, December 27, to block the flow of oil through the Strait of Hormuz if new sanctions were imposed on the Islamic Republic.

"If they (the West) impose sanctions on Iran's oil exports, then even one drop of oil cannot flow from the Strait of Hormuz," Iran's  First Vice-President Mohammad Reza Rahimi  was quoted as saying by the official IRNA news agency,  Reuters reported.

"Our enemies will give up on their plots against Iran only if we give them a firm and strong lesson."

Led by the United States, the West has piled up pressures on Iran over its controversial nuclear program.

Tension between the West and Iran escalated since a November 8 report by the UN nuclear watchdog saying Tehran appears to have worked on designing an atomic bomb and may still be pursuing research to that end.

Iran strongly denies the allegation and says it is developing nuclear energy for peaceful purposes.

The Iranian warning came three weeks after EU foreign ministers decided to tighten sanctions over the UN watchdog report and laid out plans for a possible embargo of oil from the world's No. 5 crude exporter.

French President Nicolas Sarkozy proposed hitting Iran with an oil embargo and won support from Britain, but resistance to the idea persists within and outside the European Union.

An import ban might raise global oil prices during hard economic times and debt-strapped Greece has been relying on attractively financed Iranian oil.

Iran has defiantly expanded nuclear activity despite four rounds of UN sanctions meted out since 2006 over its refusal to suspend sensitive uranium enrichment and open up to UN nuclear inspectors and investigators.

Many diplomats and analysts believe only sanctions targeting Iran's lifeblood oil sector might be painful enough to make it change course.

But new Western sanctions on Iran are opposed by Russia and China, big trade partners of Tehran, who blocked such a move at the United Nations.

Military Conflict

The United States said that it saw “an element of bluster” in the Iranian threat to block oil flow.

"It's another attempt to distract attention away from the real issue, which is their continued non-compliance with their international nuclear obligations," State Department spokesman Mark Toner said.

Analysts believe that The Iranian threat could trigger military conflict with economies dependent on oil from Gulf Arab countries.

About a third of all sea-borne oil was shipped through the Strait of Hormuz in 2009, according to the US Energy Information Administration (EIA), and US warships patrol the area to ensure safe passage.

Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq - together with nearly all the liquefied natural gas from lead exporter Qatar - must slip through the Strait of Hormuz, a 4-mile wide shipping channel between Oman and Iran.

Countries in the 27-member European Union take 450,000 barrels per day of Iranian oil, about 18 percent of the Islamic Republic's exports, much of which go to China and India.

However, some analysts say Iran would think hard about sealing off the Strait since it could suffer just as much economically as Western crude importers, and could kindle war with militarily superior big powers.

"To me, if Iran did that it would be a suicidal act by the regime. Even its friends would be its enemies," said Phil Flynn, analyst at PFG Best Research in Chicago.

Gulf delegates from the Organization of the Petroleum Exporting Countries (OPEC) said an Iranian threat to close the Strait of Hormuz would harm Tehran as well as the major regional producers that also use the world's most vital oil export channel.

Oil prices spiked on Tuesday, fuelled by fears of supply disruptions and Iranian naval exercises in a crucial oil shipping route, with gains capped by simmering euro zone debt concerns.

Brent crude oil futures jumped more than a dollar to over $109 a barrel after the Iranian threat, but a Gulf OPEC delegate said the effect could be temporary.

"For now, any move in the oil price is short-term, as I don't see Iran actually going ahead with the threat," the delegate told Reuters.

A prominent analyst said that if Iran did manage to shut down the Strait of Hormuz, the ensuing spike in oil prices could wreck the global economy, so the United States was likely to intervene to foil such a blockade in the first place.

"First, the U.S. will probably not allow Iran to close the Strait. That's a major economic thoroughfare and not just for oil. You shut that Strait and we are talking a major hit on many Middle East economies," said Carl Larry, president of Oil Outlooks in New York."Second, there is no way that the Saudis (alone) have enough oil or quality of oil to replace Iranian crude. Figure Saudi spare capacity is 2 to 4 million at best. Of that spare, about 1-2 million is real oil that is comparable out of Iran. Lose Iran, lose 3.5 million barrels per day of imports. No way."

Reproduced with permission from OnIslam.net



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