As global sanctions against Iran over its nuclear program are getting tighter, Iran has started to respond with its own cards. Tehran's threat to close the Strait of Hormuz on December 27 last year not only provoked energy markets and raised crude prices, it also increased tension and spread panic about security in Persian Gulf. But is this a real threat or Iranian diplomacy in the absence of real diplomacy between Iran and the U.S. If it is not a real threat, what is the message behind the bombast?
Various unilateral and multilateral sanctions targeting Iran have been imposed in the past months over its nuclear program. The Iranian regime, however, has been astute at absorbing such new pressures, while finding new -- though taxing -- ways of circumventing sanctions. However, as sanctions are increasingly targeting Iran's oil income, the regime's lifeline, the Iranians are showing greater sensitivity to these sanctions. The Iranian regime knows very well that the oil income is both a red line and the country's Achilles Heel. Timed with Iranian Naval exercises around the Strait of Hormuz, Iran's first Vice President Mohammad Reza Rahimi warned on Tuesday "if Iran oil is banned, not a single drop of oil will pass through Hormuz Strait."
How Iran lives with Sanctions
The European Union is likely to adopt an oil embargo on Iran on January 30, 2012. Iran exports almost 450,000 barrels of oil a day to this region, and is the fifth largest supplier of oil to the EU after Russia, Norway, Libya and Saudi Arabia. Although this accounts for less than a fifth of Iran's oil exports, Iran can still sell its oil to other costumers by offering premium discounts and could, conceivably, substitute its costumers. However, European diplomats announced on January 6 that the EU embargo on Iranian crude oil imports could take a few months to start, as some of EU capitals would like to delay this embargo in order to protect their economies.
According to economic advisors to EU, this delay is because Saudi Arabia, which is expected to cover Iran's share in this market, is not offering the same terms and prices that Iran does for its export crude oil to Europe. When I served in the National Iranian Oil Company International (NIOCI), in the department in charge of marketing and selling crude oil, I learned that Iranian oil officials are effective negotiators and can offer discounts in order to maintain their customer base.
The experience of the Iran-Iraq war (1980-88), sanctions and a U.S oil embargo against Iran since 1979, taught them to use different reward mechanisms and discounts to maintain customer loyalty. Therefore, when oil prices are high, whether due to sanctions or a possible European oil embargo, NIOCI will simply absorb new demand from other regions for its oil by selling its crude oil under the international market price. In a way, Iranian revenues, while somewhat diminished, can almost bend the conventional laws of market economics. Iran could even circumvent those sanctions that target its Central Bank's activities by commencing barter trade with its customers, including China, who imports 11 percent of its oil from Iran, and with India. In fact, this is precisely what Iran did between 1980 and 1988 during the Iran-Iraq war.
Unlike other major oil producers in the Persian Gulf, Iran has diverse recourses and other sources of income. There is no guarantee that an embargo of Iranian oil will precipitate a swift collapse of its government, nor is there a good assessment of how long this country can weather an oil embargo. Still, an embargo of Iran's oil (which is more than 10 percent of OPEC's daily export) could cause a major disruption of supply. It will undoubtedly have an immense effect on prices.
Actual threat or a rhetoric device to convey a massage
But what would happen if Iranian oil imports are boycotted universally? Iran's economy relies on oil for almost 80 percent of its government revenue. It would certainly hit it hard. Iran would likely consider this a severe threat to its national interest and the regime's existence, which would force it to play its 'last card'. By announcing that Iran would "close the Strait of Hormuz if Iran's oil is banned," Iran is communicating that targeting its ability to sell oil is a red line -- an act of war.
True, Iran may not be able to effectively close the Straight, but that misses the point: for Iran, it doesn't matter. If Iran sinks a mere ship or two in its own territorial waters to disrupt the flow of oil from this passage, even for a short time, without any formal military strike in the passage lanes, this would put immense pressure upon energy market and oil prices. Energy experts expect that even a partial blockage of the Strait of Hormuz could raise the global oil price $50 a barrel or more. This could quickly push the price of regular gasoline over $4 a gallon.
Iran can close the Hormuz Strait in two ways, conventionally and unconventionally. Conventionally Iran can use speedboats, submarines, warships, anti-cruise and ballistic missiles to simply cause difficulties in the Straight. This might precipitate a strong response from Western powers against Iran. But Iran can also use unconventional tactics, such as sinking three or four of its own empty tankers in Iranian territorial waters and simply cause a 'traffic jam'. Any closure of Strait of Hormuz, temporary or prolonged, will flame a regional conflict and would prove to be a great challenge to global energy markets. Even Saudi spare capacity would prove unhelpful until this passage reopens.
However, since this might cause military strikes against Iran, Tehran will likely keep this as its 'last card'. Closing the Straight, albeit temporarily, is their way of signaling that there are some bargaining chips that it cannot tolerate being deprived of. Since there is no ongoing dialogue between the US and Iran, the threat to close the Straight of Hormuz should be seen as an act of subtle diplomacy in the absence of ambassadors and embassies. It is not a desire to disrupt global energy markets, which would destroy any support Iran has from other countries (such as Russia and China) opposed to sanctions. Thus, it is a rhetorical device, a warning rather than a promise. It is a massage to remind the US and Europe that Iran plays a major role in global oil security and energy markets, and also to counter the convenient idea that Saudi spare capacity would simply replace Iranian oil and leave markets in tact.
These warnings should not be seen as 'bluster' by an irrational regime, but as an expression of Iran's rubric of national security.
Dr. Sara Vakhshouri was a former advisor to the Director of the National Iranian Oil Company International (NIOCI). She has published extensively on energy security, crude markets and US sanctions on Iran. She is based in Washington DC.
The problem that Iran's people have is that they are a minority in the region being Shias and Persions surrounded by sunnis , be they indians/pakistanis and arabs.
Just how the world does not really care about another minority in the region, the Kurds, Iran's people know full well that Arab countries like Saudi Arabia, Bahrain, Kuwait, UAE, Jordan as well as Pakistan and the Taliban and the government of Karzai in Afghnaistan will be all too happy to see millions of Shias and Persians lose their lives in Iran.
A weak Iranian government following regime change in Iran will put the lives of Shias in that country and all across the region at risk.
Countries like Saudi Arabia and Israel want to be the number 1 countries in the Middle East. For that, they need a weak shia nation in Iran
I wish america and iran can be just friends.
A package of ever-increasing Sanctions, embargoes and denial of good and services is a constructive non-military way to address the problem.
Perhaps another positive outcome may be the eventual toppling of Iranian theocracy.
Nothing!
These concerns about Iran is the same as Bush and Blair lies 10 years ago about Saddams WMD programm.
If the west keeps quiet and worry about the issues that matter like the eurocrisis and the economic crisis of our time, the oil price will be back to under $75 a barrel and the global economy will improve.
We went into a war in Iraq, that has bankrupt America and caused the deficit to climb and yet again we do the same thing with Iran. In 2002 oil prices were less than $25 a barrel. It climbed 6 times by 2008 to $150 a barrel. Going to war now with Iran will see oild prices reach $600 by 2018.
I dont want another war , nor another recession, especially over lies
Neither do I.
That's why strong sanctions and embargoes is the way to oppose Iran despots
http://www.tomdispatch.com/post/175490/tomgram:_pepe_escobar,_sinking_the_petrodollar_in_the_persian_gulf/
Let's wait and see. There's no questions that Iranian economy is suffering tremendously.
Let's hope Iranian rulers place the welfare of their people ahead of their megalomaniac fantasies.
Let's wait and see. Meanwhile Iranian economy is going downhill fast. the inflation is 40% and the currency is in the basement.
Let's see how long rh Ayatolahs are willing to sacrifice the welfare of their subjects in order to advance their megalomaniac chimeras.
•The three countries “recall right of all State Parties, including Islamic Republic of Iran, to develop research, production and use of nuclear energy (as well as nuclear fuel cycle including enrichment activities)”
•Iran transfers 1,200 kilograms of LEU to be held in escrow in Turkey within one month
•Pending their approval of Tehran Declaration, the IAEA, France, Russia, and the United States (the Vienna Group) would agree to provide 120 kilograms of 20%-enriched uranium fuel to Iran within one year
•If the terms were not filled by the Vienna Group, Turkey would transfer the LEU back to Iran
France, Russia, and the United States rejected the Tehran Declaration grounds identified in a letter to IAEA . The key critique was that the declaration did not address Iran’s production of 20%-enriched uranium and Iran’s accumulation of a larger amount of LEU.
> this reminds me of the run up on IRAQ. daily we gave Saddam items that he needed to correct..Everyday Saddam corrected these things. then we heard this: BUSH: to Gen. Colin Powell. "WILL you Hurry up and Attack before he complies ....again"
requires long-term diplomacy."
And this exactly what's been happening for the past 15 years or so,.
On international level there have been intense diplomatic negotiations between Iran and the world community in general U.N Assembly; U.N. Security Council; IAEA and number of direct diplomatic exchanges between Iran and EU, Iran and U.S.; Iran and Russia etc.
The result of these negotiations-- Iran's ever increasing race to manufacture nuclear weapon grade material and missile tech capable of delivering the nukes.
Hence-- sanctions. And more to come, hopefully.
Not really.
Back to reality-- about 85% of Iranian income comes from oil.
for the readers here, 16 pgs. from the desk of Barry and Secretary of Defense...they makes no bones about it the USA is actually saying it WILL CONTROL the WORLD.catch pg 2................ " We will defeat those that will deny our Power Projection".....Establish CONTROL over Territories. Noam Chomsky "USA and Israel is World Threat" http://www.chomsky.info/articles/20110204.htm
Sleepwalking into the Imperial Dark, Engelhardt: http://www.commondreams.org/view/2011/04/19-7
Americas war hawks have forgotten the soviets slinking away from Afgan BANKRUPT
No stability in Middle East, ever.....or.....Iran just happened to get in the way.....
because the USA spends 545 billion a year maintain our presence all over the GLOBE.
save the above and read when you have time, about 2 hours...my thought after reading. there will never be any peace in my lifetime. MR
So I expect them to keep up their threat, but not actually put it into practice. The mere threat will make insurance costly and keep speculation going, and we're all going to suffer from that.
And all of that for sanctions that don't work to begin with. Although everyone seems to question the sanity of Iran's leaders, I question that of our own.
If we stop this war-mongering talks that got us into Iraq in the first place, oil would come back down to $70 a barrel allowing consumers all over the world a little more to spend and getting the global economy growing a little bit.
The posturing here is Israeli/american who like to pretend that Iran is on the verge of developing some game changing nuclear weapons ability. Even if the Iranians were developing a nuke (and thats doubtful according to the NSA) it wouldnt change much, except that American and Israeli threats to attack Iran would have less impact ont he price of oil, and the regime in Iran would stick around a bit longer.
If you REALLY wanted regime change and peace with Iran the best way to go about that isnt threats and bluster, its trade and agreements.
Ahmadinejad is a firm believer in the prophecies of the twelfth Imam. This prophecy is similar to the Christian book of Revelations describing an end of world scenario you know war, massive death and destruction, fire, brimstone blah, blah, blah. So in order for the twelfth Imam to come out of the well, kill all the infidels and turn the world into an Islamic utopia Armageddon must first happen.
So in order to get his 40 virgins and be remembered though the rest of history for being the man that brought the twelfth Imam Ahmadinejad MAY think it a good idea to turn his entire country into one big suicide bomber and welcome the concept of MAD.
Iran launches missiles against Israel and Europe, we launch back, their friends the Russians and Chinese launch at us we launch back we are done. Think that sounds crazy look at the history of how WW1 got started, don’t remember history you are doomed to repeat it. This may not happen but it is a possibility one I am not willing to bet the world on.
Get rid of the mullahs through commerce and peace.
was right
http://www.informationclearinghouse.info/article9743.htm