Iran increases underground nuclear capacity sharply: diplomats

VIENNA | Thu Aug 30, 2012 10:04am EDT

(Reuters) – A U.N. watchdog report is expected to show that Iran has expanded its potential capacity to refine uranium in an underground site by at least 30 percent since May, diplomats say, adding to Western worries over Tehran‘s nuclear aims.

The U.N. International Atomic Energy Agency (IAEA) is due this week to issue its latest quarterly report on Iran’s disputed nuclear program, which the West and Israel suspect is aimed at developing bombs. Tehran denies this.

Language used by some Israeli politicians has fanned speculation that Israel might hit Iran’s nuclear sites before the November U.S. presidential vote. Washington has said there is still time for diplomatic pressure to work, but it could be drawn into any war between the two Middle East foes.

The Vienna-based diplomats, giving details on what they believe the IAEA report will show, said Iran had completed installation of two more cascades – interlinked networks of 174 centrifuges each – since the previous IAEA report in May.

They said Iran may also have added centrifuges in another part of the fortified Fordow facility, buried deep inside a mountain to better protect it against any enemy strikes, but they gave no details.

Fordow, where Iran is refining uranium to a level that takes it significantly closer to weapons-grade material, is built to house roughly 3,000 centrifuges – machines that spin at supersonic speed to increase the fissile concentration.

The May report said Iran had installed a total of 1,064 centrifuges, of which 696 were operating, in some six cascades. The diplomats said Iran has since added at least another 328, a jump of about 30 percent from the May figure, and perhaps more.

Iran says it needs this higher-grade uranium for a medical research reactor in Tehran. It is enriching uranium to lower levels at its main such plant in Natanz, where diplomats say it is also installing more centrifuges.

While the newly added centrifuges at Fordow are not yet operating, the expansion reaffirmed Iranian defiance of international demands to suspend enrichment, which can have both civilian and military uses depending on refinement level.

“There is reason to be concerned by increased tempo of enrichment, the larger stockpile of enriched uranium and, most importantly, the additional centrifuges installed in the deeply-buried facility at Fordow,” said Mark Fitzpatrick of the International Institute of Strategic Studies think-tank.

It may reinforce the belief in Israel that diplomatic and economic pressure is failing to make the Islamic Republic curb its uranium enrichment program.

Iran denies allegations it seeks a nuclear weapons capability and says all its atom work is for peaceful purposes. It has threatened wide-ranging reprisals if attacked.

Iran’s supreme leader, Ayatollah Ali Khamenei, on Thursday told heads of state from developing countries at a meeting in Tehran that the country has no interest in nuclear weapons but will keep pursuing peaceful nuclear energy.

(Reporting by Fredrik Dahl; Editing by Myra MacDonald)

Related articles

• Iran expands nuclear capacity in underground bunker: sources: VIENNA (Reuters) – Iran has installed more uranium… (reuters.com)
• Iran “expands nuclear capacity underground” (thehimalayantimes.com)
• Netanyahu points to ‘more proof’ that Iran is making progress toward nuclear weapons (timesofisrael.com)

IAEA has "serious concerns" as Iran boosts nuclear work

By Fredrik Dahl

VIENNA | Mon Mar 5, 2012 7:36am EST

(Reuters) – Iran has tripled its monthly production of higher-grade enriched uranium and the U.N. nuclear watchdog has “serious concerns” about possible military dimensions to Tehran‘s atomic activities, the agency’s chief said on Monday.

Yukiya Amano, director general of the International Atomic Energy Agency, also told the IAEA’s 35-nation board of governors about the lack of progress in two rounds of talks between the Vienna-based U.N. agency and Tehran this year.

U.S. President Barack Obama and Israeli Prime Minister Benjamin Netanyahu were to meet shortly in Washington to discuss Iran, deeply at odds over the timing for possible last-resort military action against Iran’s nuclear program.

Even though Obama offered assurances of stiffened U.S. resolve against Iran before the White House meeting, the two allies remained far apart over explicit nuclear “red lines” that Tehran should not be allowed to cross.

Iran denies suspicions that it is covertly seeking nuclear weapons capability, in part by coordinating efforts to process uranium, test high explosives and revamp a ballistic missile cone to accommodate a nuclear warhead.

But its refusal to curb sensitive atomic work that can have both civilian and military applications has drawn increasingly tough U.N. and Western sanctions against the major oil producer.

During the meetings in the Iranian capital in January and February, Iranian officials stonewalled the IAEA’s requests for access to a military site seen as central to its investigation into the nature of the Islamic state’s nuclear activity.

“The agency continues to have serious concerns regarding possible military dimensions to Iran’s nuclear program,” Amano told the closed-door meeting, according to a copy of his speech.

NO CREDIBLE ASSURANCES

The IAEA “is unable to provide credible assurance about the absence of undeclared nuclear material and activities in Iran, and therefore to conclude that all nuclear material in Iran is in peaceful activities,” he added.

A report by the IAEA to member states last month said Iran was significantly stepping up uranium enrichment, a finding that sent oil prices higher on fears that tensions between Tehran and the West could boil over into military conflict.

Since the IAEA’s previous report in November, Amano said Iran has tripled monthly production of uranium refined to a fissile concentration of 20 percent – well above the level usually needed to run nuclear power plants.

Though indicated by the IAEA’s confidential report last month, it was the first time Amano spoke in public about this rapid increase in Iran’s enrichment activities, which has stoked Western and Israeli suspicions about Tehran’s nuclear agenda.

The Islamic Republic says the more highly refined uranium will replenish the dwindling special fuel stocks of a Tehran reactor that produces medicinal isotopes.

But 20 percent enrichment, experts say, also represents most of the technical effort needed to attain the 90 percent threshold required for nuclear explosions.

Much of this work is carried out deep inside a mountain at Iran’s underground Fordow facility to better shield it against military strikes, and further expansion is planned.

Despite intensive discussions with Iran, Amano said, there had been no agreement on a “structured approach” to resolve outstanding issues with its nuclear program during the talks held in January and February.

Iran “did not address the agency’s concerns in a substantive manner,” Amano said.

Making clear, however, that he would keep trying to engage Iran on the issue, he added: “Regarding future steps, the agency will continue to address the Iran nuclear issue through dialogue and in a constructive spirit.”

(Editing by Mark Heinrich)

Related articles

• IAEA meets to consider action on Iran’s nuclear programme (guardian.co.uk)
• Iran Holds Air Defense Drills As IAEA Says Iran Blocks Access To Key Nuclear Site (mb50.wordpress.com)

Iran Holds Air Defense Drills As IAEA Says Iran Blocks Access To Key Nuclear Site

Submitted by Tyler Durden on 02/21/2012 22:59 -0500

As if the market needed another bizarro catalyst to ramp even higher courtesy of an even more pronounced drop in corporate earnings courtesy of soaring energy costs, that is just what it is about to get following news of further deterioration in the Nash equilibrium in Iran, where on one hand we learn that IAEA just pronounced Iran nuclear talks a failure (this is bad), and on the other Press TV reports that the Iran army just started a 4 day air defense exercise in a 190,000 square kilometer area in southern Iran (this is just as bad). The escalation “ball” is now in the Western court. And if Iraq is any indication, after IAEA talks “failure” (no matter how grossly manipulated by the media), the aftermath is usually always one and the same…

From The Guardian:

The UN nuclear agency has declared its latest inspection visit to Iran a failure, with the regime blocking access to a key site suspected of hosting covert nuclear weapon research and no agreement reached on how to resolve other unanswered questions.

The statement from the International Atomic Energy Agency was issued shortly after an Iranian general warned of a pre-emptive strike against any nation that threatens Iran.

“We engaged in a constructive spirit but no agreement was reached,” the statement quoted IAEA chief Yukiya Amano as saying.

The communique said that Iran did not grant requests by the IAEA mission to visit Parchin, a military site thought to be used for explosives testing related to triggering a nuclear weapon. Amano called this decision “disappointing”. No agreement was reached on how to begin “clarification of unresolved issues in connection with Iran’s nuclear programme, particularly those relating to possible military dimensions”, the statement said.

Apparently it is Iran’s fault for seeing right through the IAEA’s track record of being nothing but the catalyst for all out aggression. Here is a reminder why, courtesy of Hans Blix. And with that out of the way, we continue:

The fact that the statement was issued early Wednesday, shortly after midnight and just after the IAEA experts left Tehran, reflected the urgency the agency attached to announcing the failed outcome. The language of the statement clearly if indirectly blamed Tehran for the lack of progress.

We can already see the statements from Clinton, who will do anything to make her transition to head of the World Bank as seamless and as “deserved” as pobssible.

In the meantime, Iran is not playing possum:

Iran’s Khatam al-Anbia Air Defense Base started the four-day exercises codenamed Tharallah on Monday within an area of 190,000 square kilometers in southern Iran, with the key objective of boosting the country’s air defense near the Persian Gulf and the nation’s Bushehr nuclear power plant.

During the military drills slated in four tactical phases, the Iranian army will test and assess the operation of its surface-to-air and radar equipment, and will collect new data on the procedures.

State-of -the-art radar, artillery and missile systems as well as interceptor fighter aircraft of the Air Force will be used in the military drills.

In the first phase of the drills, the fighter aircraft of the hypothetical enemy launched attacks against local air defense forces as part of an electronic warfare exercise.

Using passive and active sensors and multilevel data collection and communications systems, the air defense forces managed to thwart the mock enemy’s measures promptly and effectively, and safeguard the country’s radar network.

Meanwhile, Iran’s Islamic Revolution Guards Corps (IRGC) Ground Forces wrapped up another drill codenamed Val Fajr in the central province of Yazd on Monday, to further enhance the combat preparedness of Iranian armed forces.

Why is Iran doing this now?

Iran maintains that the military drills are defensive in nature and meant to convey a message of peace and friendship to regional countries.

Tehran has also sent a public invitation to regional states to conduct joint naval drills with Iranian forces.

Like Israel?

Rhetorical questions aside, we hope our readers stocked up on gasoline. Because things are about to get uglier. And by that we mean more expensive. But courtesy of hedonic adjustments, more expensive means cheaper, at least to the US government.

Source

Related articles

• Iran nuclear talks a failure, says IAEA (guardian.co.uk)
• UN nuclear agency says Iran talks have failed (cbc.ca)
• IAEA Says No Deal With Iran (myfoxny.com)
• Inspectors barred from Iran site (bbc.co.uk)
• BBC News – Iran nuclear row: UN inspectors barred from Iran site (bbc.co.uk)

Iran Sanctions Tighten as OSG to Frontline Halt Crude Cargo

Feb. 13 (Bloomberg) — Sanctions on Iran are tightening after Overseas Shipholding Group Inc., Frontline Ltd. and owners controlling more than 100 supertankers said they would stop loading cargoes from the Organization of Petroleum Exporting Countries‘ second-largest producer.

OSG, based in New York, said Feb. 10 that the pool of 45 supertankers from seven owners in which its carriers trade will no longer go to Iran. Four OSG-owned ships, managed by Tankers International LLC, called at the country’s biggest crude-export terminal in the past year, ship-tracking data compiled by Bloomberg show. Nova Tankers A/S and Frontline, with a combined 93 vessels, said Feb. 9 and 11 they wouldn’t ship Iranian crude.

Previous efforts to curb Iran’s oil income and stop it from developing nuclear weapons failed because the structure of the shipping industry means vessels are often managed by companies outside the U.S. or European Union. An EU embargo on Iranian oil agreed to Jan. 23 extended the ban to ship insurance. With about 95 percent of the tanker fleet insured under rules governed by European law, there are fewer vessels able to load in Iran.

“It’s the insurance that’s completed the ban on trading with Iran,” said Per Mansson, a shipbroker for 31 years and managing director of Norocean Stockholm AB, which handles tanker charters. “Last summer, many countries started to be a little bit tougher, but the insurance is the real trigger.”

Kharg Island

OSG’s Overseas Rosalyn, which can carry about 2 million barrels, arrived at Kharg Island on Jan. 27 and departed the next day, tracking data compiled by Bloomberg show. It left about 16 feet deeper in the water, an indication it loaded cargo. The vessel is managed by Tankers International, which has its head office in Cyprus. OSG complies with all U.S. and European laws and its headquarters in New York doesn’t manage charters, OSG Chief Executive Officer Morten Arntzen said in an e-mail Jan. 30.

Tankers International told owners the pool’s vessels will no longer sail to Iran after changes to EU regulations, Arntzen said in a Feb. 10 e-mail. Insurers are no longer able to cover vessels trading in the Persian Gulf nation, he wrote.

Ship owners sometimes group their vessels to coordinate charters and improve earnings. The Tankers International pool operates 45 very large crude carriers, or VLCCs, from OSG and six other companies, including Antwerp-based Euronav NV and St. Helier, Channel Islands-based DHT Holdings Inc.

Nova Tankers

“All the owners in the pool have stated that they will not trade Iran because of the consequences,” DHT CEO Svein Moxnes Harfjeld said by phone Feb. 10. “DHT is complying with all relevant regulations and sanctions, and following recent developments our vessels have been instructed not to trade Iran.”

Frontline companies including Hamilton, Bermuda-based Frontline Ltd. and Frontline 2012 won’t ship Iranian crude, Jens Martin Jensen, chief executive officer of Frontline Management AS, said by e-mail and phone on Feb. 11 and 12. Frontline operates 43 VLCCs, according to its website.

Nova Tankers, the Copenhagen-based operator of a pool of ships including vessels owned by Mitsui O.S.K. Lines Ltd., won’t load Iranian crude because of European sanctions, Managing Director Morten Pilnov said by phone from Singapore on Feb. 9. The pool will have about 50 vessels by the end of this year, according to data on its website.

Nippon Yusen K.K., the second-largest owner of VLCCs, won’t carry Iranian oil if it means ships aren’t insured, Yuji Isoda, an investor relations manager for the Tokyo-based company, said Feb. 9. The company doesn’t yet know how its insurers will handle the EU sanctions, he said by phone.

Tighter Restrictions

U.S. and EU leaders are trying to tighten restrictions on business with Iran, which produced 3.55 million barrels of crude a day in January, 11 percent of OPEC’s total, according to data compiled by Bloomberg. Oil sales earned Iran $73 billion in 2010, accounting for about 50 percent of government revenue and 80 percent of exports, the U.S. Energy Department estimates.

The United Nations has imposed four sets of sanctions on Iran, and the International Atomic Energy Agency said in November the country had studied making an atomic bomb. The government in Tehran says its nuclear program is for civilian purposes and that documents held by the IAEA purporting to show designs and tests of weapon components are fakes.

Iran has threatened to block shipments through the Strait of Hormuz in the Persian Gulf, through which about 20 percent of the world’s globally traded oil passes. Crude futures in New York advanced 32 percent to $100.19 a barrel since Oct. 4.

Senate Bill

More trade with Iran may be blocked if a bill approved Feb. 2 by the U.S. Senate Banking Committee becomes law, making U.S. companies responsible for the actions of their foreign units when dealing with Iran. A spokesman for committee chairman Tim Johnson, a South Dakota Democrat, declined to comment.

While the Japanese government said last month it would curb imports from Iran, India’s Foreign Secretary Ranjan Mathai said Jan. 17 his country wouldn’t. China, the Persian Gulf country’s largest customer, needs the oil for development, Vice Foreign Minister Zhai Jun told reporters Jan. 11.

Founded in 1948, OSG has 111 vessels and 3,500 employees, according to its website. Its biggest shareholders include the family of board members Oudi and Ariel Recanati, who control about 10 percent, data compiled by Bloomberg show. Oudi Recanati is an Israeli citizen and Ariel Recanati is a U.S. citizen, according to a Sept. 6 filing with the Securities and Exchange Commission. Charles A. Fribourg sits on the board of OSG and Continental Grain Co., the data show.

Marshall Islands

Shares of OSG, which has 14 supertankers, fell 71 percent in the past year as a glut of vessels drove down transport rates. The company will report a loss of $178.6 million for this year, down from $204.4 million for 2011, according to the median of five analyst estimates compiled by Bloomberg.

Three other OSG vessels from the Tankers International pool called at Kharg Island in the past year, data compiled by Bloomberg show. They fly the Marshall Islands flag, which means they are registered there for regulatory purposes, according to data on the website of International Registries Inc. Almost 9 percent of the tanker fleet is flagged in the Marshall Islands, behind Panama and Liberia, according to data compiled by London- based Clarkson Plc, the world’s biggest shipbroker.

“Ship owners and brokers are now seeing a tightening of sanctions,” said Bob Knight, managing director of tankers at Clarkson in London. “This is a sign that sanctions are starting to bite.”

–With assistance from Michelle Wiese Bockmann and Rob Sheridan in London. Editors: Dan Weeks, Sharon Lindores.

Source

Related articles

• OSG Says Tanker Pool Will Halt Iran Trade After Sanctions (businessweek.com)
• Another Shipping Bankruptcy Filing Could Signal More on the Way (GMR, ONAVQ, TNK, OSG, NAT, FRO, NM, DRYS) (247wallst.com)
• Despite Sanctions by EU & US, Irani Black Gold Turns into 24K Gold (jafrianews.com)
• Iran threatens to stop Gulf oil if sanctions widened (mb50.wordpress.com)

U.N. nuclear talks in Tehran: frustrated hopes

By Fredrik Dahl

VIENNA | Mon Feb 6, 2012 12:01pm EST

(Reuters) – After two days of rare and intensive talks in Tehran, senior U.N. nuclear officials may have felt they were finally making headway towards getting Iran to address suspicions that it is bent on developing the ability to make atom bombs.

Then, on the evening before the third and final session of last week’s meetings in the Iranian capital, the visiting U.N. nuclear watchdog delegation was handed an envelope that dealt a blow to any hopes of substantive progress.

According to one Vienna-based diplomat briefed on the discussions, it contained a procedural “new work plan” at odds with the nature of the discussions until then, in which the U.N. experts had tried to focus on concrete steps required by Iran.

In the view of Western officials, the Iranian move was further proof of the kind of stalling tactics Tehran has often used during the decade-long dispute over its nuclear program.

“It is delay. It is talks about talks,” a senior Western envoy said about the Iranian negotiating strategy.

The team from the U.N. International Atomic Energy Agency, headed by Deputy Director General Herman Nackaerts, was forced to use much of the last day of the January 29-31 meeting to push back against the Iranian initiative.

“The agency had to spend a great deal of time getting over Iranian obfuscation,” said another diplomat. “It wasted a lot of time, at least a day.”

Neither Iran nor the IAEA have commented on the Iranian proposal or given details about it.

But it evoked memories among Western diplomats of an ultimately doomed plan agreed between the IAEA and Tehran in 2007 to resolve “outstanding issues” that failed to allay international doubts about Iran’s nuclear aspirations.

By putting forward a new such proposal, they suspect, Iran was trying once again to drag talks out while pressing ahead with nuclear work Western powers fear is aimed at acquiring the means and technologies needed to build atomic bombs.

“The Iranians kept trying to push that ‘work plan’ and the agency was not going to go there. They had some very frank engagement,” the senior envoy said.

Iran’s mission to the IAEA was not reachable for comment. Iranian Foreign Minister Ali Akbar Salehi has described the meeting with the IAEA as “very good,” without elaborating.

A second round of talks has been slated for later this month but Western diplomats hold out little hope that the February 21-22 meeting in Tehran will fare much better than the previous round.

One diplomat said the January negotiations ended with a draft “discussion paper” listing the main points the IAEA wants Iran to answer, especially allegations about possible military dimensions to its uranium enrichment program.

The talks coincide with soaring tension in the long-running row, with the United States and European Union adopting sanctions targeting Iran’s oil exports and the Islamic Republic threatening retaliation by closing the main Gulf oil shipping lane.

IRAN UNDER PRESSURE

The outcome of the IAEA’s meetings in Tehran will be scrutinized in Washington, European capitals and Israel for signs of whether Iran’s leadership may finally be prepared to give ground after a decade of pursuing shadowy nuclear development goals, or whether it remains as defiant as ever.

Many fear a downward spiral towards military conflict and rocketing oil prices if diplomacy and sanctions fail to change the Islamic state’s nuclear course.

The Vienna-based IAEA, tasked with preventing the spread of nuclear arms in the world, is pressing Iran to be transparent.

It wants Iran to explain intelligence findings, detailed in an IAEA report in November, about research and development work pointing to nuclear weapons aims, and grant access to sites, documents and people relevant for its investigation.

Iran has indicated readiness for the first time to answer the agency’s questions but also repeatedly dismissed the allegations as baseless and forged.

It says its drive to stockpile enriched uranium is entirely peaceful and aimed at generating electricity using a future network of nuclear power plants.

The deadlock over the IAEA’s suspicion that Iran is looking into “weaponizing” its nuclear activity dates back over three years.

Nackaerts and his team specifically asked last week for access to the Parchin military site near Tehran, without receiving a clear answer from the Iranian side, diplomats said.

The secretive U.N. agency would not comment on the visit beyond a formal statement in which Director General Yukiya Amano said: “The agency is committed to intensifying dialogue. It remains essential to make progress on substantive issues.”

The IAEA said it explained to Iran its “concerns and identified its priorities, which focus on the clarification of possible military dimensions.”

“The IAEA also discussed with Iran the topics and initial steps to be taken, as well as associated modalities,” it said.

Western diplomats said the statement made clear that there had been little progress on substance, but also raised pressure on Iran to deliver tangible results in the next meeting.

Tehran is in the “game of gaining time,” one of them said.

But at least it would be clear who was to blame if the talks failed, he added: “It is going to be Iran’s responsibility.”

The IAEA may also hope that the Iranian side next time will send senior officials such as Fereydoun Abbasi-Davani, the head of Iran’s Atomic Energy Organisation, to the talks.

Iran’s ambassador to the IAEA, Ali Asghar Soltanieh, was the main counterpart in the January meeting. While he is a senior nuclear official, the U.N. agency frequently sees him in Vienna.

“There was nothing achieved on this visit and in fact the agency could not get Iran to engage on possible military dimensions questions at all,” the senior Western envoy said.

(Editing by Mark Heinrich)

Source

Related articles

• Nuclear experts barred from Iran site: diplomats – Reuters (reuters.com)
• Failed talks between Iran and UN nuclear agency increases pressure on Tehran – Fox News (foxnews.com)

The U.S. Government Funded the Iranian Terrorist Group Which “Found” The Documents Upon Which the Warmongers Are Relying

Submitted by George Washington on 01/15/2012 15:33 –0500

The people pushing for war against Iran are the same neocons who pushed for war against Iraq. See this and this. (They planned both wars at least 20 years ago.)

The IAEA report being trumpted as a casus belli contains no new information, but is based on a re-hashing of old, debunked claims stemming from “laptop documents”.

Wikileaks documents reveal that the new IAEA head was heavily backed by the U.S., based upon his promises of fealty to the U.S.  Indeed, as we’ve seen in the nuclear energy arena, the IAEA is not a neutral, fact-based organization, but a wholly-captured, political agency.

But where did the documents come from originally?

As Gareth Porter noted in 2008:

The George W. Bush administration has long pushed the “laptop documents” – 1,000 pages of technical documents supposedly from a stolen Iranian laptop – as hard evidence of Iranian intentions to build a nuclear weapon. Now charges based on those documents pose the only remaining obstacles to the International Atomic Energy Agency (IAEA) declaring that Iran has resolved all unanswered questions about its nuclear programme.

But those documents have long been regarded with great suspicion by U.S. and foreign analysts. German officials have identified the source of the laptop documents in November 2004 as the Mujahideen e Khalq (MEK), which along with its political arm, the National Council of Resistance in Iran (NCRI), is listed by the U.S. State Department as a terrorist organisation.

Interestingly, the Bush Administration – and especially Dick Cheney – helped to fund the MEK (see confirming articles here and here).

And the New York Times, Washington Post and others are reporting that Rudy Giuliani, former Homeland Security Secretary Tom Ridge, former national security adviser Fran Townsend and former Attorney General Michael Mukasey are supporting the MEK as well.

So the terrorist group which “found” the documents is funded by neoconservatives who want to overthrow Iran. What a coincidence!

And as Gareth Porter notes in the above-linked article, the Mossad may have created the documents in the first place:

There are some indications, moreover, that the MEK obtained the documents not from an Iranian source but from Israel’s Mossad.

One thing is clear: the U.S. and its allies have a long history of using forged documents as an excuse for war.

Source

Related articles

• Report: Israel Engaged in False Flag Operation to Foment Terrorist Attacks Inside Iran (news.firedoglake.com)
• PressTV: ‘IAEA inspectors abetted terrorists’ (jhaines6.wordpress.com)
• Who’s Running Covert Ops Against Iran? the Obama Administration Protests Too Little. (alethonews.wordpress.com)
• IAEA Said to Agree to Meeting With Iran at End of January (businessweek.com)
• Iranian media call for revenge for scientist killings, as leaders seem to … – Fox News (foxnews.com)
• Iran threatens Israel, U.S. over scientist killing (cnn.com)
• Is America Helping Israel Kill Iranian Scientists? The View from Iran (theatlantic.com)

Iran’s currency collapse prompts fear of oil blockade, energy price spike

Peter Goodspeed Dec 22, 2011

Iran’s nuclear push is rapidly turning into a game of chicken with the world’s economy.

Faced with the threat of growing international sanctions and unprecedented economic uncertainty — which has seen the value of its currency slashed in half in recent weeks — Iran announced Thursday that its navy will stage a 10-day naval exercise in the Strait of Hormuz starting Saturday.

The move, which increases the risk of military confrontation with the United States, may temporarily choke off world oil exports from the Middle East, drive up international energy prices and damage the global economy.

The head of Iran’s navy, Admiral Habibollah Sayyari told Iranian state television Thursday that Iranian submarines, destroyers, missile-launching ships and attack boats will occupy a 2,000-kilometre stretch of sea from the Strait of Hormuz, at the mouth of the Persian Gulf, off the southern edge of the Arabian Peninsula and into the Gulf of Aden, near the entrance to the Red Sea.

Dubbed Velayat-90, the naval war games will start Saturday and are designed to display Iran’s naval power in the face of growing international criticism of its nuclear program.

Earlier this week, U.S. Defence Secretary Leon Panetta predicted Iran will be able to assemble a nuclear bomb within a year and warned that the United States hasn’t ruled out using military force to prevent that from happening.

Hamed Jafarnejad/AFP/Getty Images

Habibollah Sayari points out locations for the war games Wednesday.

The day before Iran announced its war games, General Martin Dempsey, the Chairman of the U.S. Joint Chiefs of Staff, told CNN television that the United States is determined to prevent Iran from becoming a nuclear power.

“My biggest worry is they will miscalculate our resolve,” Gen. Dempsey said. “Any miscalculation could mean that we are drawn into conflict and that would be a tragedy for the region and the world.”

Iran says its naval war games will be held in international waters and Admiral Sayyari said there has been no decision yet on whether to close the Strait of Hormuz.

But last week Iranian Foreign Ministry spokesman Ramin Mehmanparast warned that “if the region faced a war-like situation, then everything would then become war-like.”

The Strait is a narrow 50 kilometre wide passageway through which about a third of the world‘s oil tanker traffic sails. A crucial choke point, it virtually controls Middle East oil exports.

The potential naval confrontation comes just as the United States and its allies are stepping up pressure to impose stricter economic sanctions against Iran in an effort to force it to abandon its controversial nuclear program.

In early November, the International Atomic Energy Agency issued a report that increased international fears Iran is deliberately seeking to develop atomic bomb capability and the United States and Europe immediately applied stronger economic sanctions against Tehran.

Those sanctions appear to be hurting Iran’s economy, squeezing the country’s banks and sending the Iranian Rial plunging to its lowest level against the U.S. dollar.

Washington recently declared the Iranian banking system guilty of money laundering, which has forced U.S. banks to step up the reporting requirements of banks they deal with which may be doing business with Iran. The impact has made life so difficult for foreign businesses that many have decided to stop dealing with the Iranians.

In November, Canada and Britain also decided to sever all ties with the Central Bank of Iran and France began calling for a European Union boycott of Iranian oil imports.

Earlier this month, the U.S. Congress passed the Iran Threat Reduction Act, which bans foreign banks from operating in the United States if they conduct transactions with the Central Bank of Iran.

The new array of measures have created a legal minefield for Iran’s trading partners and resulted in a significant reduction in business and investment. That in turn has sparked panic selling of Iranian currency, which has lost over 50% of its value in the past few months. The value of the rial has fallen by more than 15% since Tuesday.

As Iranian traders begin to use barter arrangements to avoid sanctions, long lines of Iranian citizens have been rushing to ditch their own currency and begun buying gold.

In the past, Iranian officials dismissed sanctions as doomed to fail, but earlier this week Iran’s Foreign Minister, Akbar Salehi was quoted in the official Islamic Republic New Agency as saying: “We cannot pretend the sanctions are not having an effect.”

The governor of the Central Bank of Iran, Mahmoud Bahmani, also told reporters that Iran needs to act as if it were “under siege.”

As Iran’s economy reels, it now appears to be trying to warn the international community it can take retaliatory steps that will reduce oil flows, drive up prices and damage the global economy, hoping that such moves may alienate other countries from following Washington’s lead.

It’s a dangerous game, because Iran itself depends on foreign oil sales for more than half its own government revenues.

National Post

Related articles

• Iran To Practice Closing Strait Of Hormuz (mb50.wordpress.com)
• Iran’s Navy to Hold Drill in International Waters (foxnews.com)
• Iranian Official Threatens Military Drill Sealing Off the Strait of Hormuz (foxnews.com)
• Sanctions against Iran could trigger oil price spike (business.financialpost.com)
• Ban Iranian Oil? We’ll Shut Down the Persian Gulf (gcaptain.com)