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Page 10 ■ Thursday, January 5, 2012


US warns Iran against closing key oil passage


strongly warned Iran on Dec. 28 against closing a vital Persian Gulf waterway that carries one-sixth of the world’s oil supply, after Iran threatened to choke off traffi c through the Strait of Hormuz if Wash- ington imposes sanctions targeting the country’s crude exports. The increasingly heated exchange rais-

es new tensions in a standoff that has the potential to spark military reprisals and spike oil prices to levels that could batter an already fragile global economy. Iran’s navy chief said Dec. 28 that it

TEHRAN, Iran (AP) — The U.S.

pumping about 4 million barrels a day. Gulf Arab nations ap-

peared ready to at least ease market tensions. A senior Saudi Arabian oil offi cial told The Associated Press that Gulf Arab nations are ready to step in to offset any potential loss of exports from Iran. The offi cial spoke on condition of anonymity because he was not autho- rized to comment on the issue.

would be “very easy” for his country’s forces to close the strategic Strait of Hor- muz, the passage at the mouth of the Per- sian Gulf through which about 15 million barrels of oil pass daily. It was the second such warning by Iran in two days, refl ect- ing Tehran’s concern that the West is about to impose new sanctions that could hit the country’s biggest source of revenue, oil. “Iran has comprehensive control over

the strategic waterway,” Adm. Habibol- lah Sayyari told state-run Press TV, as the country was in the midst of a 10-day mili- tary drill near the strategic waterway. The comments drew a quick response

from the U.S. “This is not just an important issue for

security and stability in the region, but is an economic lifeline for countries in the Gulf,

secretary George Little said. “Interfer- ence with the transit or passage of vessels through the Strait of Hormuz will not be tolerated.” Separately, Bahrain-based U.S. Navy 5th Fleet spokeswoman Lt. Rebecca Re- barich said the Navy is “always ready to counter malevolent actions to ensure free- dom of navigation.” Rebarich declined to say whether the

U.S. force had adjusted its presence or readiness in the Gulf in response to Iran’s comments, but said the Navy “maintains a robust presence in the region to deter or counter destabilizing activities, while safeguarding the region’s vital links to the international community.” Iran’s threat to seal off the Gulf, sur-

to include Iran,” Pentagon press Associated Press

been producing about 10 million barrels per day, has an overall production ca- pacity of over 12 million barrels per day and is widely seen as the only OPEC member with suffi cient spare capacity to offset major shortages. What remains unclear is what routes

Saudi Arabia, which has

Iranian submarines and warships participate in navy drill in the Sea of Oman Dec. 28, 2011. Iran’s navy chief warned Dec. 28 that his country can easily close the strategic Strait of Hormuz at the mouth of the Persian Gulf, the passageway through which a sixth of the world’s oil fl ows

the Gulf nations could take to move the oil to markets if Iran goes through with its threat. About 15 million barrels per day pass

through the Hormuz Strait, according to the U.S. Energy Information Administra- tion.

appeared to allay some concerns. The U.S. benchmark crude futures contract fell $1.98 by the close of trading Dec. 28 on the New York Mercantile Exchange, but still hovered just below $100 per barrel. U.S.

Mark Toner played down the Iranian threats as “rhetoric,” saying, “we’ve seen these kinds of comments before.” While the Obama administration has

State Department spokesman

rounded by oil-rich Gulf states, refl ect its concerns over the prospect that the Obama administration will impose sanc- tions over its nuclear program that would severely hit its biggest revenue source. Iran is the world’s fourth-largest oil producer,

warned Iran that it would not tolerate at- tempts to disrupt traffi c through the Strait of Hormuz, U.S. offi cials do not see any indication that the situation will come to that. Nor do they believe that Iran, which is already under increasing pressure from sanctions, would risk disrupting the Strait because doing so would further damage Iran’s own economy. Instead, the administration believes

Iran is playing the only card it has left: is- suing threats and attempting to shift focus away from its own behavior. U.S. offi cials have not said whether there is a concrete response plan in place

tapped, but Gulf oil leaders, who met in Cairo on Dec. 24, declined to say whether they had discussed alternate routes or what they may be. The Saudi offi cial’s comment, however,

There are some pipelines that could be

should Iran seek to block the Strait. But the administration has long said it is com- fortable with the U.S. Naval presence in the region, indicating that the U.S. could respond rapidly if needed. The White House has been largely si-

lent on Iran’s threat, underscoring the administration’s belief that responding at the White House level would only encour- age Iran. While many analysts believe that Iran’s

was to reduce budget costs and would pass money directly to the poor. But crit- ics have pointed to it as another in a se- ries of bad policy moves by the hardline president. So far, Western nations have been un-

warnings are little more than posturing, they still highlight both the delicate na- ture of the oil market, which moves as much on rhetoric as supply and demand fundamentals. Iran relies on crude sales for about 80

percent of its public revenues, and sanc- tions or even a pre-emptive measure by Tehran to withhold its crude from the market would already batter its fl ailing economy.

Cochrane said in a report Dec. 28 that markets are “jittery over the possibility” of Iran’s blockading the strait. But “such action would also damage Iran’s economy, and risk retaliation from the U.S. and al- lies that could further escalate instability in the region.” “Accordingly, it is not likely to be a de- cision that the Iranian leadership will take lightly,” he said.

fi nancial sector added new pressures to the country’s already struggling economy. Government cuts in subsidies on key goods like food and energy have angered Iranians, stoking infl ation while the coun- try’s currency steadily depreciates. The impetus behind the subsidies cut

Earlier sanctions targeting the oil and IHS Global Insight analyst Richard

able to agree on sanctions targeting oil ex- ports, even as they argue that Iran is try- ing to develop a nuclear weapon. Tehran maintains its nuclear program — already the subject of several rounds of sanctions — is purely peaceful. The U.S. Congress has passed a bill that penalizes foreign fi rms that do busi- ness with the Iran Central Bank, a move that would heavily hurt Iran’s ability to export crude. European and Asian nations use the bank for transactions to import Iranian oil. President Barack Obama has said he

oil exports would likely temporarily spike oil prices to levels that could weigh heavily on the world economy. Closing the Strait of Hormuz would hit

even harder. Energy consultant and trader The Schork Group estimated crude would jump to above $140 per barrel. Conserva- tives in Iran claim global oil prices will jump to $250 a barrel should the water- way be closed. By closing the strait, Iran may aim to send the message that its pain from sanc- tions will also be felt by others. But it has equally compelling reasons not to try. The move would put the country’s

plan, pushed through parliament by Ira- nian President Mahmoud Ahmadinejad,

hardline regime straight in the cross-hairs of the world, including nations that have so far been relative allies. Much of Iran’s Continued on next page

Sanctions specifi cally targeting Iran’s

will sign the bill despite his misgivings. China and Russia have opposed such measures.

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