Iran Threatens to Block Oil Shipments, as U.S. Prepares Sanctions

Herb 2012/02/15 17:26:48

Iran is having quite the day: In addition to trumpeting its recent nuclear achievements, it also thumbed its nose at EU sanctions "against Iran's energy and banking sectors" by cutting off oil exports to six European countries. The Netherlands, Spain, Italy, France, Greece, and Portugal are the affected countries, reports the AP. Iran's oil minister had recently warned that just such a move could occur. The Wall Street Journal notes that the news sent Brent crude-oil futures to a six-month high.

WASHINGTON — A senior Iranian official on Tuesday delivered
a sharp threat in response to economic sanctions being readied by the United
States, saying his country would retaliate against any crackdown by blocking
all oil shipments through the Strait of Hormuz, a vital artery for transporting
about one-fifth of the world’s oil supply.

The New York times

Iranian Court Begins
Trial of U.S. Man (December 28, 2011)

As Further Sanctions Loom, Plunge in Currency’s Value
Unsettles Iran (December 21, 2011)

Times Topic: Iran

The declaration by Iran’s first vice president,
Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation
that, if fully implemented, could substantially reduce Iran’s oil revenue in a
bid to deter it from pursuing a nuclear weapons program.

Prior to the latest move, the administration had been laying
the groundwork to attempt to cut off Iran from global energy markets without
raising the price of gasoline or alienating some of Washington’s closest

Apparently fearful of the expanded sanctions’ possible
impact on the already-stressed economy of Iran, the world’s third-largest
energy exporter, Mr. Rahimi said, “If they impose sanctions on Iran’s oil
exports, then even one drop of oil cannot flow from the Strait of Hormuz,”
according to Iran’s official news agency. Iran just began a 10-day naval
exercise in the area.

In recent interviews, Obama administration officials have
said that the United States has developed a plan to keep the strait open in the
event of a crisis. In Hawaii, where President Obama is vacationing, a White
House spokesman said there would be no comment on the Iranian threat to close
the strait. That seemed in keeping with what administration officials say has
been an effort to lower the level of angry exchanges, partly to avoid giving
the Iranian government the satisfaction of a response and partly to avoid
spooking financial markets.

But the energy sanctions carry the risk of confrontation, as
well as economic disruption, given the unpredictability of the Iranian
response. Some administration officials believe that a plot to assassinate the
Saudi ambassador to the United States — which Washington alleges received
funding from the Quds Force, part of the Iranian Revolutionary Guards Corps —
was in response to American and other international sanctions.

Merely uttering the threat appeared to be part of an Iranian
effort to demonstrate its ability to cause a spike in oil prices, thus slowing
the United States economy, and to warn American trading partners that joining
the new sanctions, which the Senate passed by a rare 100-0 vote, would come at
a high cost.

Oil prices rose above $100 a barrel in trading after the
threat was issued, though it was unclear how much that could be attributed to
investors’ concern that confrontation in the Persian Gulf could disrupt oil

The new punitive measures, part of a bill financing the
military, would significantly escalate American sanctions against Iran. They
come just a month and a half after the International Atomic Energy Agency
published a report that for the first time laid out its evidence that Iran may
be secretly working to design a nuclear warhead, despite the country’s repeated

In the wake of the I.A.E.A. report and a November attack on
the British Embassy in Tehran, the European Union is also contemplating strict
new sanctions, such as an embargo on Iranian oil.

For five years, the United States has implemented
increasingly severe sanctions in an attempt to force Iran’s leaders to
reconsider the suspected nuclear weapons program, and answer a growing list of
questions from the I.A.E.A. But it has deliberately stopped short of targeting
oil exports, which finance as much as half of Iran’s budget.

Now, with its hand forced by Congress, the administration is
preparing to take that final step, penalizing foreign corporations that do
business with Iran’s central bank, which collects payment for most of the
country’s energy exports.

The sanction would effectively make it difficult for those
who do business with Iran’s central bank to also conduct financial transactions
with the United States. The step was so severe that one of President Obama’s
top national security aides said two months ago that it was “a last resort.”
The administration raced to put some loopholes in the final legislation so that
it could reduce the impact on close allies who have signed on to pressuring

The legislation allows President Obama to waive sanctions if
they cause the price of oil to rise or threaten national security.

Still, the new sanctions raise crucial economic, diplomatic,
and security questions. Mr. Obama, his aides acknowledge, has no interest in
seeing energy prices rise significantly at a moment of national economic
weakness or as he intensifies his bid for re-election — a vulnerability the
Iranians fully understand. So the administration has to defy, or at least
carefully calibrate, the laws of supply and demand, bringing to market new
sources of oil to ensure that global prices do not rise sharply.

“I don’t think anybody thinks we can contravene the laws of
supply and demand any more than we can contravene the laws of gravity,” said
David S. Cohen, who, as treasury under secretary for terrorism and financial
intelligence, oversees the administration of the sanctions. But, he said, “We
have flexibility here, and I think we have a pretty good opportunity to dial
this in just the right way that it does end up putting significant pressure on

The American effort, as described by Mr. Cohen and others,
is more subtle than simply cutting off Iran’s ability to export oil, a step
that would immediately send the price of gasoline, heating fuel, and other
petroleum products skyward. That would “mean that Iran would, in fact, have
more money to fuel its nuclear ambitions, not less,” Wendy R. Sherman, the
newly installed under secretary of state for political affairs, warned the
Senate Foreign Relations Committee earlier this month.

Instead, the administration’s aim is to reduce Iran’s oil
revenue by diminishing the volume of sales and forcing Iran to give its
customers a discount on the price of crude.

Some economists question whether reducing Iran’s oil exports
without moving the price of oil is feasible, even if the market is given
signals about alternative supplies. Already, analysts at investment banks are
warning of the possibility of rising gasoline prices in 2012, due to the new
sanctions by the United States as well as complementary sanctions under
consideration by the European Union.

Since President Obama’s first months in office, his aides
have been talking to Saudi Arabia and other oil suppliers about increasing
their production, and about guaranteeing sales to countries like China, which
is among Iran’s biggest customers. But it is unclear that the Saudis can fill
in the gap left by Iran, even with the help of Libyan oil that is coming back
on the market. The United States is also looking to countries like Iraq and
Angola to increase production.

Daniel Yergin, whose new book, “The Quest,” describes the
oil politics of dealing with states like Iran, noted in an interview that
“given the relative tightness of the market, it will require careful
construction of the sanctions combined with vigorous efforts to bring
alternative supplies into the market.” He said that it would “add a whole new
dimension to the debate over the Keystone XL pipeline,” the oil pipeline from
Canada to the United States that the administration has sought to delay.

“The only strategy that is going to work here is one where
you get the cooperation of oil buyers,” said Michael Singh, managing director
of the Washington Institute for Near East Policy. “You could imagine the
Europeans, the Japanese, and the South Koreans cooperating, and then China
would suck up all of the oil that was initially going to everyone else.”

A broader question is whether the sanctions — even if
successful at lowering Iran’s oil revenue — would force the government to give
up its nuclear ambitions.

One measure of the effects, however, is that the Iranian
leadership is clearly concerned. Already the Iranian currency is plummeting in
value against the dollar, and there are rumors of bank runs.

“Iran’s economic problems seem to be mounting and the whole
economy is in a state of suspended expectation,” said Abbas Milani, director of
Iranian studies at Stanford University. “The regime keeps repeating that
they’re not going to be impacted by the sanctions. That they have more money
than they know what to do with. The lady doth protest too much.”

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Top Opinion

  • Torchmanner ~PWCM~JLA 2012/02/15 18:48:54
    Torchmanner ~PWCM~JLA
    The only way that Iran can block the Straight is if every vessel in their Navy gets sunk there.
    Iran would be stupid to try to stop ships, including US ships, in International Waters.

    Let's just get it over with. Nuke 'em now, before obaaaama totally disarms us.

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  • Brian Tristan MacQuillan 2012/02/17 08:59:12
    Brian Tristan MacQuillan
    Iran has been bellicose in the past, but the difference now are Irans actions. Iran can try to block the Strait of Hormuz, if the regime that runs the country is stupid enough to do so, it would not work of course, and it would invite military intervention. What Iran's game is is anyone's guess, and that is the point, to keep everyone guessing. However, the time for this regime is quickly approaching its expiration date, because it creates too much disruption for those in the region who want international trade, and creates a major foreign relations issue for everyone else.

    Everyone else can pussy foot around, but Israel moves closer and closer to an attack on Iran's "peaceful" nuclear facilities, and when that happens there will be action in the Strait of Hormuz. Our current administration's relationship with Israel certainly does not help matters, but Iran has messed with all the wrong countries, so in the end it is not going to matter much. The support Iran gets from Russia and China will only go so far, and it appears that is not so much of a factor now.

    Iran flattened
  • S. Gompers 2012/02/16 09:50:43
  • Greywolf 2012/02/16 05:17:49
    Lets not forget who is protecting Iran, Russia and China both who want to remove the dollar as the world standard currency.
  • no1badboy56 2012/02/16 03:49:00 (edited)
    Maybe the idiot in the oval office will get the clue that we need to open up our oil fields. Russia can supply the EU with all the oil and natural gas they'll ever need.

    Here Iran, sit on this!!!!!

  • STEELAN... no1badb... 2012/02/16 05:12:45
    STEELANGEL 凸 Metal Up 凸
    Russia is invested in Iran.
  • Someone Else 2012/02/16 03:32:35
    Someone Else
    Sounds like they now have the nuke's they wanted.
  • Palpati... Someone... 2012/02/16 04:45:06
  • STEELAN... Palpati... 2012/02/16 05:13:47
    STEELANGEL 凸 Metal Up 凸
    Ronnie is almost as insane as O'bam.
  • Palpati... STEELAN... 2012/02/17 01:02:20
  • goatman112003 2012/02/16 03:21:23
    They aren't worried about the embargo because certain countries will pay in gold for the oil and not dollars which is what the Iranians want.
  • Pat 2012/02/16 02:48:38
    We obviously cannot "nuke" Iran. This will be taken care of by the President if and when the need arises. I'm sure it will be another "no drama" move on Obama's part which will free up the straits and allow the oil out. Nuking people is not the only way to solve a problem.
  • Arinn 2012/02/16 01:39:39
    Isn 't that always the problem.
  • Mike 2012/02/16 01:18:31
    Drill baby drill drilling oil
  • Ken 2012/02/16 01:15:35
    Now is the time to take Iran down, before it is too late to take Iran down and they take us down.
  • wtf 2012/02/16 01:09:32
    First of all this is exactly the reason we should drill for our own oil right here in the US. We would be able to cut all ties to foreign oil and would not have to deal with the idiots running Iran. Problem solved.

    Second, since the environmental wackos don't want us getting our own oil and our elected idiots in DC are willing to pander to them I suggest the following. Iran wants to develop nuclear technology and most of the world does not want them to have it, I say lets give them our nuclear technology... in the form of mushroom clouds. Problem solved.
  • WhereIsAmerica? ~PWCM~JLA 2012/02/16 01:06:34
    WhereIsAmerica? ~PWCM~JLA
    And Obama will probably congratulate them on their achievements....OMG!
  • SteveMarine- JLA 2012/02/16 01:02:52
    SteveMarine- JLA
    Tactical nuke....Iran....problem solved. Better hope Obama is gone soon.
  • STEELAN... SteveMa... 2012/02/16 05:17:58
    STEELANGEL 凸 Metal Up 凸
    I'm pretty sure Israel got the super earth penetrators back while bush was in office. Name the time and place, lol..
  • CUDDLY BUT STILL CRABBY 2012/02/16 01:00:12
    Obama is excited. Just another step in the direction for eventually declaring Martial Law here in the USA.

    How's that hope and change working out for you dimwits that voted for him?
  • Torchmanner ~PWCM~JLA 2012/02/15 18:48:54
    Torchmanner ~PWCM~JLA
    The only way that Iran can block the Straight is if every vessel in their Navy gets sunk there.
    Iran would be stupid to try to stop ships, including US ships, in International Waters.

    Let's just get it over with. Nuke 'em now, before obaaaama totally disarms us.
  • EmoMcPa... Torchma... 2012/02/15 21:23:03
    I couldn't have said it better; I'm sure one of Our nuclear subs are there too ; )
  • CUDDLY ... Torchma... 2012/02/16 01:20:12
    Unfortunately, I would bet good money I don't have that our armed forces personnel in that region will be unable to return fire if and when they are fired on. It will take a call to Washington DC and several hours delay as Obama tries to make up his mind on what to do.
  • Palpati... CUDDLY ... 2012/02/16 04:47:02
  • Dagon 2012/02/15 17:34:42

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