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31 December 2011 - 07:58

The increasingly heated exchange between Iran and the US raises new tensions in a stand off that has the potential to spark military reprisals and spike oil prices to levels that could batter an already fragile global economy.

Although the United States warned Iran against closing a vital Persian Gulf waterway that carries %17 of the world's oil supply in several occasions, but it is necessary to note that Iran threatened to choke off traffic through the Strait of Hormuz if Washington imposes sanctions targeting the country's crude exports. Bearing in mind that this is reflecting Iran 's concern that the West is about to impose new sanctions that could hit the nation's biggest revenue source – oil, according to some leaked information when a senior Saudi Arabian oil official said that “(Persian) Gulf Arab nations are ready to step in to offset any potential loss of exports from Iran”.
So Iran looks to this issue as a political problem against its national sovereignty, but US considered as a military problem. In this view the Iranian comments drew a quick response from Pentagon press secretary saying that "this is not just an important issue for security and stability in the region, but is an economic lifeline for countries in the (Persian) Gulf, to include Iran."Interference 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 said the Navy is "always ready to counter malevolent actions to ensure freedom of navigation." Although she declined to say whether the U.S. force had adjusted its presence or readiness in the (Persian) Gulf in response to Iran 's comments, but said the Navy "maintains a robust presence in the region to deter or counter destabilising activities, while safeguarding the region's vital links to the international community.1"

More than one-third of the world's tanker-borne oil passes through the Strait of Hormuz and Iran is the world's fourth-largest oil producer, pumping about 4 million barrels a day. So any imposed sanction against Iranian oil industry would be accepted destabilising action towards Iranian people and government. In this case the US navy presence in the Persian Gulf is to ensure that passage of PGCC countries oil remains free in loss and hostility towards Iran.
Although Iran rejected Washington's call for a military hotline between the capitals to defuse any "miscalculations" that could occur between their military forces in the Persian Gulf in September, but this suggestion shows regional sensitivity and all sides responsibilities. So new tensions in a stand off that has the potential to spark military reprisals and propel oil prices to levels that could batter a global economy already grappling with a European debt crisis.
Unfortunately US State Department spokesman in irresponsibility manner played down the Iranian message as "rhetoric," saying, "We've seen these kinds of comments before." While many analysts believe that Iran's warnings are little more than posturing, they still highlight both the delicate nature 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 of its public revenues, and sanctions or an even pre-emptive measure by Iran to withhold its crude from the market would already batter its flailing economy. 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 US and allies that could further escalate instability not only in the region, but in the world.
Earlier sanctions that have targeted the oil and financial sector have 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 inflation while the country's currency is steadily depreciating.
So far, Western nations have been unable to agree on sanctions targeting oil exports, even as western media argue that Iran is trying to develop its ability for nuclear military use, while Iran maintains its nuclear program – already the subject of several rounds of sanctions – is purely peaceful. Iran believes that international order is changed and rules of international system is now different. In the light of this theory new world order should come to enforcement with new players such as Iran. Iran has stand against the US double standard towards the Middle East issues and consequently US imposed even sanctions on those foreign countries and companies deal with Iran which is more than those sanctions from UN.
In the recent hostile action U.S. Congress has passed a bill banning dealings with the Iran Central Bank, a move that would heavily hurt Iran's ability to export crude. The bill could impose penalties on foreign firms that do business with Iran's central bank while European and Asian nations use the bank for transactions to import Iranian oil. Although China and Russia have opposed such measures, but a likely result of the sanctions would be that oil prices would at least temporarily spike to levels that could weigh heavily on the world economy. The message of closing the Strait of Hormuz which would hit even harder is just to prevent the US putting world in this situation. This is a message for PGCC countries to be careful about highest level of involvement and weakest points in the US foreign policy.
Although this will results crude would jump to above $140 per barrel in short term and in long term global oil prices will jump to 2-3 times a barrel, but this money will return to western countries in light of new military agreements and not only country militarising, but regional weaponising.
This is an obvious message by Iran that closing the Hormuz Strait, Iran aims to send a signal that its pain from oil sanctions will also be felt by oil producers and consumers not in the region, but also in the world. But if regional and world power carefully listen to message it has equally compelling reasons not to try. Iran has its own allies in Asia and Europe which most of its crude export to them and western consumers also don't rely on US policy towards world issues.
Although some politicians believe shutting down the Hormuz Strait is the last bullet that Iran has and therefore they have some doubt that Iran would do this and at the same time lose its support from China and Russia. But this not the case if Iran feels US is trying to hit its sovereignty in light of oil sanction.


News ID 181325