Category Archives: Strait of Hormuz

Special Report: Iran’s cat-and-mouse game on sanctions

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By Rachel Armstrong, Stephen Grey and Himanshu Ojha
SINGAPORE | Wed Feb 15, 2012 8:30am EST

(Reuters) – Just before noon on a sticky, overcast Saturday morning earlier this month a truck carrying two white containers waited at an electronic checkpoint to leave Singapore’s main port. The containers bore the bright red letters IRISL, the initials of Iran‘s cargo line, which has been blacklisted by the United Nations, United States and European Union.

Anchored just off Singapore’s playground island of Sentosa that same day, the container ship Valili was also stacked high with IRISL boxes. A couple of miles to the east the Parmis, another container ship, also carried IRISL crates. Shipping movements data tracked by Reuters shows the Parmis had pulled into Singapore waters from the northern Chinese port of Tianjin early that morning.

The ships and containers are key parts in an international cat-and-mouse game, as Iran attempts to evade the trade sanctions tightening around it. Washington and European capitals want to stop or slow Iran’s nuclear program. They believe Iran Shipping Lines(IRISL), which moves nearly a third of Iran’s exports and imports and is central to the country’s trade, plays a critical role in evading sanctions designed to stop the movement of controlled weapons, missiles and nuclear technology to and from Iran.

IRISL would not comment for this story. Last June the company said in an interview that there was no evidence it had been involved in arms trafficking. Iran says its nuclear program is peaceful and that IRISL has no links with any weapons program. Tehran complained vigorously last June when the European Union followed the United States with beefed-up sanctions that banned new contracts with IRISL. A United Nations resolution forces all states to inspect IRISL’s cargo.

But many in the West hold up IRISL as exhibit A for Iran’s ability to evade sanctions because the shipping line regularly reflags its ships and changes their official owners.

An analysis of shipping data sheds new light on that deception. Using data from IHS Fairplay, a ship tracking group that uses ship registration documents from various sources, and Reuters Freight Fundamentals Database, which compiles location data from every ship’s Automatic Identification System, shows that despite the sanctions 130 of the 144 banned ships in IRISL’s fleet continue to call at many of the world’s major ports hidden behind a web of shell companies and diverse ownership.

Dozens of Iranian ships have used Singapore several hundred times in the past two years, for instance, as a stop-off on their way to other destinations such as China.

The data shows that in the 48 months before U.S. sanctions began in September 2008, IRISL made 345 changes to its fleet including names, the flags ships sailed under, operators, managers and registered owners. In the 40 months since sanctions began there have been at least 878, including 157 name changes, 94 changes of flag, 122 changes of operator, and 127 changes of registered ownership.

Hugh Griffiths, head of Countering Illicit Trafficking-Mechanism Assessment Projects at the Stockholm International Peace Research Institute, says what’s unique about those changes is their pace and scale. Normally a ship’s name or flag changes when its owner sells it after a decade or so.

“In the Iranian case, none of these apply because it’s not based on the normal commercial reasons you’d expect,” he said. “Nothing on this scale has ever been seen before in recent history.”

John Dalby, a former oil tanker captain and chief executive of Marine Risk Management, a global consultancy and maritime security company, agrees. “When you add name changes, flag changes, changes of operators and then changes of registered owners – especially if it is, to all intents and purposes, the same owner – it means they are trying to hide. Especially so many in such a relatively short space of time.”

NO DISGUISE

The Parmis and Valili operate under the flag not of Iran but of Barbados and Malta, respectively. On paper they are no longer part of IRISL, having both changed owners, operators and flag in the past couple of years. But a unique seven-figure “IMO number” issued to each known ship in the world for its entire lifespan reveals the identity of each ship as a sanctioned vessel ultimately owned by the Iranian cargo line. The brightly painted IRISL containers sitting on the ships’ decks add to the impression that the ships are still Iranian.

“They certainly don’t work too hard to disguise themselves here,” said the owner of a tanker management company in Singapore.

The Iranian government has a knack for survival. Sanctions may be hurting ordinary Iranians – grain ships to the Islamic republic have been diverted as Tehran struggled to find credit to finance its food supplies – but Tehran often figures out a way around such blockages.

As far back as late 2010, according to a report from a Middle Eastern intelligence agency, which was confirmed by European diplomats with access to their own intelligence, an Iranian committee boasted that the West had only discovered half of the shell companies and front individuals it used to hide its trading empire; the sanctions were seen as “harmless in Asian countries.”

A WEB OF OWNERS

When the Singapore checkpoint light turned green earlier this month, the truck driver turned onto an expressway and headed towards the crossing to Malaysia. Just shy of the border he turned into an industrial estate. Within 10 minutes another three trucks with IRISL containers had arrived.

In every port a ship visits, it needs someone on the ground to sort out its paperwork and organize its cargo. In Singapore that used to be done for Iranian vessels by IRISL’s regional office, Asia Marine Network, which was placed under financial sanctions by the United States in 2008.

A June 2011 indictment by the Manhattan District Attorney, Cyrus Vance, alleges that IRISL’s Singapore head, Alireza Ghezelayagh, and Singaporean businessman Cheong Kheng Guan tried to get round those sanctions, in particular a ban on any U.S. dollar transfers by IRISL.

The two men were among five people and 11 companies in three countries named in the 317-count indictment that charged IRISL and its agents with illegal use of banks in Manhattan. The companies were said to have “deceived Manhattan banks into processing more than $60 million worth of payments using aliases or corporate alter egos to hide their conduct.”

The indictment says that one of Cheong’s eight shipping agencies in Singapore, Sinose Maritime, entered into a joint venture with Iran’s Asia Marine Network. Sinose Maritime then became the exclusive agent for IRISL in the city-state, the indictment says. Cheong and Ghezelayagh also established a new company, Leading Maritime, just eight days after Asia Marine was placed under sanctions.

The Manhattan DA’s office, which declined to comment because its investigations are continuing, alleges that bank records it has obtained show that two of the Singapore companies, Sinose and Leading Maritime, channeled a total of around $41.8 million through the American financial system on behalf of IRISL.

The money moved in 120 different wire payments that the DA’s office claims went via the New York branches of HSBC, Bank of New York Mellon, Standard Chartered and Deutsche Bank, causing them to inadvertently breach their sanction obligations. None of those banks were said to have any knowledge of the IRISL connection and none have been charged by the DA’s office.

After Cheong’s indictment last June, he stood down as a director and shareholder from eight of the 10 companies he was listed as holding, according to the Singapore Accounting and Corporate Regulatory Authority registry.

But his companies and employees remained active, and there is evidence to indicate that not all ties to IRISL were severed.

One of Cheong’s former companies, Global Maritime Investments, is listed as the manager of a newly built ship called the Adelina. Commissioned by IRISL and completed in 2010, the Adelina, a container ship, obtained a Singapore flag last December. But Thomson Reuters-owned due-diligence database Accelus lists the “Group Beneficial Owner” of Adelina as Iran Shipping Lines. The latest data from ship consultancy Alphaliner also shows the Adelina is still operated by IRISL.

The Adelina last left Singapore on January 18. Reuters tracked the ship as it steamed up the Red Sea, through the Suez Canal and the Aegean Sea. After stopping at Istanbul it sailed to the Russian port of Novorossiysk on the Black Sea where it moored yesterday.

“TOO MUCH POLITICS”

The day before Cheong stepped down last June, Global Maritime got a new director: Danny Yau, also the director of a further six companies owned or directed by Cheong. As well as now running Global Maritime, Yau has set up a new shipping agency, Hardsea Agencies Pte Ltd. Sitting in his new office overlooking Singapore’s Tanjog Pagar port, Yau said Hardsea is a simple shipping agency, unattached to IRISL.

“Not directly, we don’t deal with them, we’re just agents for certain ships to carry cargo, general cargo,” he said when asked of his firm’s relationship with the Iranian line. “It doesn’t break UN rules or sanctions.”

Yau declined to elaborate when contacted later about Global Maritime Investments and the Adelina’s links to IRISL. “I don’t say anything; it’s too much politics,” he said.

Another of Cheong’s employees at Sinose Maritime, Ling Chong Yung, is listed as the director of Adelina’s official owner, Pride Shipping Oriental Pte. Reuters visited Ling at the offices of Damilang Maritime, a newly established shipping agency two streets away from Yau’s new office.

Office staff said Ling had left for China on a business trip the day before, but all inquiries related to Pride Shipping had to go through Yau at Hardsea Agencies, who they referred to as “the boss”.

Cheong, meanwhile, is still at work in the shipping business.

Visited at a drab office block on an industrial estate in the Buona Vista area of Singapore, Cheong declined to speak. He later responded to questions via email. He said none of the companies he is involved in do any work on behalf of IRISL. Sinose Maritime, he said, is in the course of being liquidated.

“In so far as the indictment against me is concerned, it is entirely unjustified. I have instructed solicitors in the U.S. to defend the case vigorously and to defeat the charges which are totally without any foundation,” he said.

HIGH COURT SHERIFF

Not everyone agrees with Washington’s claims that IRISL is still in charge of ships that visit Singapore. When Singapore’s High Court Sheriff seized three IRISL ships in September 2010 for failing to meet their credit arrangements, the court considered whether Singapore should, under UN sanctions, continue to hold the ships even after the payments were made.

The city-state is clear on its attitude to sanctions: it will implement those agreed on by the United Nations, but will not take any unilateral action or subscribe to those issued unilaterally by the United States or European Union.

The UN embargo orders IRISL assets be frozen, including those of “any person or entity acting on their behalf or at their direction, and to entities owned or controlled by them.”

But the judge in the 2010 case, Justice Quentin Loh, decided that the UN sanctions target specific IRISL entities such as IRISL Benelux, and not the three companies listed as the owners of the ships. He also ruled that even if UN sanctions did apply, they did not imply that commercial assets such as ships should be seized. Singapore released the vessels.

Loh concluded: “Links to IRISL itself are, by themselves, neither here nor there.”

Reuters Freight Fundamentals shows that Singapore has received at least 150 visits by 83 ships believed to be IRISL-linked over the past two years.

A spokesman for the Singapore Ministry of Foreign Affairs said that “Singapore enforces all United Nations Security Council (UNSC) sanctions against Iran. We do not enforce the unilateral sanctions by any jurisdiction which go beyond the UNSC sanctions. In this regard, Singapore understands that IRISL in itself is not a UN-designated entity.”

The foreign affairs spokesman said Cheong Kheng Guan “faces proceedings under U.S. law for engaging in business dealings with and having facilitated the activities of U.S.-designated entities. Based on what we know, there has been no violation of UNSC sanctions or Singapore law in this particular case.”

U.S. diplomatic sources privately say that they wish Singapore would take a harder line.

SUNNY MALTA, IRANIAN HIDEOUT

And it’s not just Singapore. Twenty three sanctioned Iranian ships have visited 12 EU ports since July 2010, when the EU imposed its own first sanctions on IRISL, including 96 stop-offs in Malta, 14 visits to Antwerp and 10 to Rotterdam.

As well, 48 Iran-linked ships sail under the flag of Malta and 12 under that of Cyprus.

In the Mediterranean island of Malta, authorities say trade with Iran has been declining steeply, with exports down to 144,996 euros ($191,000) in 2010 from more than 2 million euros in 2008 and 2009. Joseph Cole, the chairman of the Maltese sanctions monitoring board, said a contract between IRISL and Malta Freeport will not expire until November 2013, but an intensive program of customs inspections had already driven the shipping line away.

“We have made it so difficult for IRISL ships that they have reduced their operation to Malta to almost nil – even though technically they can still come,” said Cole.

Movement data for IRISL’s fleet, however, show that 18 ships have visited Malta’s Freeport over the last two years, three of them as recently as November.

IRISL containers could be seen stacked on the concrete yards of the Freeport last week. Despite being a member of the European Union, Malta not only supplies flagging services to IRISL ships, but is also home to 24 shell companies that help conceal Iran’s ownership of vessels.

In the Grand Harbour of Malta, below the sandstone ramparts of the capital Valletta, a grey-painted building houses Transport Malta. The agency earns around 300,000 euros annually from registering IRISL ships, according to an estimate by Reuters based on a table of tariffs on the agency’s website. It declined to comment, citing commercial sensitivity.

It is also home to the country’s public shipping register where – recorded in longhand in large paper volumes – is the paper trail of Iran’s shell games, as well as evidence of those who have worked for the country.

As sanctions have tightened, the Maltese register shows, Iran’s ships have regularly switched not just flags, but names, registered owners, registered agents, and the addresses of owners and agents. The Alva, for instance, a 66,500-deadweight tonnes (DWT) container vessel, has had three different owners since it was built in Germany in 2008 and acquired by IRISL that year. It originally flew a German flag. IRISL switched that to a Maltese flag, then back to a German one in 2010, then again to Maltese last year.

READY TO SACRIFICE

Most Maltese lawyers and agents now refuse to act for IRISL. Not only are new commercial contracts with the Iranian line banned under EU sanctions, existing ties have been scrapped by most agents to avoid damage to their reputation, according to two Maltese lawyers. That has pushed most business into the hands of a small Maltese outfit, the Royal-Med Shipping Agency, which has an office on the sea front in the tourist resort of Sliema. The agency is now under direct U.S. sanctions as an alleged cover operation for IRISL.

The Royal-Med agency’s steel shutters were drawn shut one day last week. A phone call later to Royal-Med’s listed number was answered by an employee who said the agency “was in the process of closing down. We have no activity.”

The employee, who declined to give his name, said Royal-Med had previously acted as agents at the Freeport for IRISL and then for HDS Lines, a company named by the U.S. government and the EU as a subsidiary of IRISL. He said HDS had decided to end visits to the island last November, leaving Royal-Med with no business.

Dr Tonio Borg, Malta’s foreign minister, says IRISL has such a large Maltese fleet because the country has such a large shipping register. Malta’s role as Europe’s biggest registry was not the result of lax regulation. “We see it as a flag of confidence, not of convenience,” he said.

Asked about Malta’s connections to IRISL, he revealed that Malta was prepared to de-register Iran’s entire sanctioned fleet. “We’re moving in that direction,” he said. But Iran should not be allowed simply to relocate its ships to other European countries, he said.

“We believe that all services to IRISL should be prohibited,” said Borg. “We are ready to make that sacrifice – provided that all countries also make the sacrifice� Otherwise it would be masochistic.”

(Rachel Armstrong reported from Singapore, Stephen Grey from London and Valletta, and Himanshu Ojha from New York; with additional reporting by Jonathan Saul and Philip Baillie in London, Christopher Scicluna in Malta, and Mitra Amiri in Tehran; writing by Stephen Grey; edited by Simon Robinson and Sara Ledwith)

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Iran May Disrupt Hormuz Shipping, Supporting Oil, S&P Says

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By Ayesha Daya

Feb. 14 (Bloomberg) — Iran might respond to sanctions with “low-level provocation” such as slowing shipping through the Strait of Hormuz, keeping oil prices at their currently high level, according to three Standard & Poor’s reports.

Iranian authorities could disrupt supplies of oil from the Persian Gulf by imposing tanker inspections or boarding merchant ships in its territorial waters, supporting oil prices because markets would increasingly view armed conflict as “a real, if remote, possibility,” according to the reports’ authors, who include Paris-based Jean-Michel Six, S&P’s chief economist for Europe.

The likelihood of severe disruption of oil supplies through the strait, through which 20 percent of the world’s oil flows, is “very low,” though if one did occur, it might boost oil to $150 a barrel and push economies into a recession, according to the reports.

“For oil-producing sovereigns of the Gulf Cooperation CouncilSaudi Arabia, U.A.E., Qatar, Kuwait, Oman, and to a lesser extent, Bahrain — higher oil prices would actually be beneficial,” said Elliot Hentov, an S&P credit analyst in Dubai. “As oil exporters, they would receive more foreign earnings that they could either use to stimulate demand or improve their government’s balance sheets.”

The U.S. and the European Union are imposing tougher sanctions on Iran and Israel has talked of an attack on the Islamic Republic’s nuclear facilities in an attempt to halt its atomic program. Iran, which says its nuclear program is for civilian purposes, has threatened to block the Strait of Hormuz in retaliation.

The three S&P reports discuss the impact of rising Gulf tensions on Middle Eastern states seeking to borrow money, the risks that a closure of Hormuz would pose for companies looking for credit and the threats to global economic growth from an oil shock.

Iran’s Revolutionary Guard Begins Military Exercises Near The Strait Of Hormu

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AP | Feb. 4, 2012, 6:07 AM

TEHRAN, Iran (AP) — Iran’s powerful Revolutionary Guard began military exercises Saturday in the country’s south, the latest show of force after threats to close the strategic Strait of Hormuz in retaliation for tougher Western sanctions.

Plans for new Iranian naval games in the Persian Gulf off the country’s southern coast have been in the works for weeks. State media announced new maneuvers in southern Iran involving ground forces, but it was not immediately clear whether they were part of the planned naval training missions scheduled for this month or a separate operation.

The latest military maneuvers got under way following stern warnings by Iran’s Supreme Leader, Ayatollah Ali Khamenei, about any possible U.S. or Israeli attacks against Tehran’s nuclear facilities. It also comes after Western forces boosted their naval presence in the Gulf led by the American aircraft carrier USS Abraham Lincoln.

Iran officials and lawmakers have repeatedly said that their country would close the Strait of Hormuz at the mouth of the Persian Gulf in retaliation for sanctions that affect Iran’s oil exports. They have as yet made no attempts to disrupt shipping through the waterway, the route for one-fifth of the world’s crude oil, and the U.S. and allies have said they would respond swiftly to any attempts at a blockade.

Last month, Iran’s navy wrapped up 10 days of exercises in the Gulf, but the Revolutionary Guard — which is directly under control of the supreme leader — represents a significantly stronger military force and controls key programs such as missile development. Iranian state media announced the new maneuvers, but gave no further details.

Khamenei, in a speech nationally broadcast on Friday, staked out a hard line after suggestions by Israel that military strikes are an increasing possibility if sanctions fail to rein in the Islamic Republic’s nuclear program.

He pledged to aid any nation or group that challenges Israel and said any military strikes would damage U.S. interests in the Middle East “10 times” more than they would hurt Iran. The comments also may signal that Tehran’s proxy forces — led by Lebanon’s Islamic militant group Hezbollah — could be given the green light to revive attacks on Israel as the showdown between the archfoes intensifies.

The West and its allies fear Iran could use its uranium enrichment labs — which make nuclear fuel — to eventually produce weapons-grade material. Iran insists it only seeks reactors for energy and medical research.

Israel has so far publicly backed the efforts by the U.S. and European Union for tougher sanctions that target Iran’s crucial oil exports. But Israeli leaders have urged even harsher measures and warn that military action remains a clear option despite Western appeals to allow time for the economic pressures and isolation to bear down on Iran.

Iran’s oil minister repeated claims that an EU oil embargo will not cripple Iran’s economy, claiming Saturday that the country already has identified new customers to replace the loss in European sales that accounted for about 18 percent of Iran’s exports.

Rostam Qassemi also reinforced Iran’s warning to Saudi Arabia and other fellow OPEC members against boosting production to offset any potential drop in Tehran’s crude exports, saying the cartel should not be used as a political weapon against a member state.

Although Israel has raised the strongest hints that it is likely to start a military campaign, Khamenei reserved some of his strongest comments for Israel’s key U.S. ally.

“A war itself will damage the U.S. 10 times” more in the region, said Khamenei.

Khamenei claimed Iran, however, could only emerge stronger. “Iran will not withdraw. Then what happens?” asked Khamenei. “In conclusion, the West’s hegemony and threats will be discredited” in the Middle East. “The hegemony of Iran will be promoted. In fact, this will be in our service.”

On Thursday, Israel’s defense minister, Ehud Barak, suggested the world is increasingly ready to consider a military strike if sanctions fail. The head of the country’s strategic affairs ministry, Vice Premier Moshe Yaalon, also suggested Iran’s main military installations are still vulnerable to airstrikes — even as Iran starts up a new uranium enrichment facility deep in a mountainside bunker south of Tehran.

Yaalon’s comments appear to reinforce earlier suggestions by other Israel officials that the window for a possible attack is closing and Israel would need to strike by summer to inflict significant setbacks on Iran’s nuclear facilities. The officials spoke on condition of anonymity under standing guidelines.

At Ramstein Air Base in Germany, U.S. Defense Secretary Leon Panetta said sanctions remain the best approach to pressure Iran. But he told U.S. airmen Friday that Washington keeps “all options on the table and would be prepared to respond if we have to.”

Khamenei answered by repeating Iran’s declarations that it will never roll back its nuclear program, which he had earlier said was now part of the country’s “identity” and a cornerstone of its technological endeavors. On Friday, Iran said it successfully sent a small satellite into orbit in the third such launch in recent years, state media reported.

“From now on, in any place, if any nation or any group confronts the Zionist regime, we will endorse and we will help. We have no fear expressing this,” said Khamenei, using the phrase widely used by Iran’s leader to describe Israel.

Read more: BI

EU states agree gradual ban on Iran oil, sanctions on

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By Justyna Pawlak and David Brunnstrom
BRUSSELS | Mon Jan 23, 2012 7:23am EST

(Reuters) – European Union governments agreed on Monday to an immediate ban on all new contracts to import, buy or transport Iranian crude oil, a move to put pressure on Tehran‘s disputed nuclear program by shutting off its main source of foreign income.

However, to protect Europe’s economy as it battles to overcome a debilitating debt crisis, the governments agreed to phase in the embargo, giving countries with existing contracts with Iran until July 1, 2012 to end those deals.

At a meeting of foreign ministers in Brussels, EU governments also agreed to freeze the assets of Iran’s central bank and to ban all trade in gold and other precious metals with the bank and other public bodies, EU officials said.

Western powers hope the far stricter sanctions net, which brings the EU more closely into line with U.S. policy, will force Iran to scale back or halt its nuclear work, which Europe and the United States believe is aimed at developing weapons. Iran says it is enriching uranium solely for peaceful purposes.

EU foreign policy chief Catherine Ashton said she wanted financial sanctions to persuade Tehran to return to negotiations with the West, which she represents in talks with Iran.

“I want the pressure of these sanctions to result in negotiations,” she told reporters before the ministers met.

“I want to see Iran come back to the table and either pick up all the ideas that we left on the table … last year … or to come forward with its own ideas,” she said.

Tehran says its nuclear program is necessary to meet its rising energy needs, but the United Nations’ International Atomic Energy Agency said last year it had evidence that suggested Iran had worked on designing a nuclear weapon.

EU sanctions follow fresh financial measures signed into law by U.S. President Barack Obama on New Year’s Eve and mainly targeting the oil sector, which accounts for some 90 percent of Iranian exports to the EU. The European Union is Iran’s largest oil customer after China.

MEASURED STEPS

Economic considerations weighed heavily on EU preparations for the embargo in recent weeks because of the heavy dependence of some EU states on Iranian crude. Greece, which is at the heart of the debt crisis, is almost entirely dependent on Iranian oil. It must now seek alternative sources.

Diplomats will return to the issue of oil sanctions before May, officials said, to assess whether the measures are effective and whether EU states are succeeding in finding sufficient alternative resources.

Saudi Arabia, Kuwait and other oil-rich states in the Gulf are expected to increase their output of crude oil to offset the loss of access to Iranian exports.

“There will be a review of the embargo before May,” one EU official said. The review could potentially affect the date when the full ban takes effect, diplomats said.

Greece, which depends on financial help from the EU and the International Monetary Fund to stay afloat, gets nearly a quarter of its oil from Iran, thanks to favorable financing terms from Tehran.

“The financial situation of Greece at the moment is not the brightest one, and rightly they are asking us to help them find a solution,” a senior EU official told reporters on Friday.

With a significant part of EU purchases of Iranian oil covered by long-term contracts, the grace period will be an important factor in the effectiveness of the EU measures.

The unprecedented effort to take Iran’s 2.6 million barrels of oil per day of exports off international markets has kept global prices high, pushed down Iran’s rial currency and caused a surge in the cost of basic goods for Iranians.

(Additional reporting by Adrian Croft in London and Sebastian Moffett in Brussels; Editing by Luke Baker and)

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Iran ‘definitely’ closing Strait of Hormuz over EU oil embargo

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Iran ‘denintely’ shutting down Strait of Hormuz if EU bans oil

Tensions in the Gulf could reach a breaking point as a senior Iranian official said Iran would “definitely” close the Strait of Hormuz if an EU oil embargo disrupted the export of crude oil, the semi-official Fars news agency reports.

With Washington’s decision to deploy a second carrier strike group in the Gulf, the prospect of all-out war in the region is becoming increasingly likely.

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