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Iran threatens Strait of Hormuz closure

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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.

Peak oil leaves the spotlight as global economic uncertainty rules oil prices

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Peak oil theories over the last few years are now not in the spotlight that rules over oil prices this year as the new king of market movers, the “global economic uncertainty” looks set to be a game changer in the coming months ahead.

IEA Oil Report 2012

The latest Monthly Oil Market Report from the US IEA (International Energy Agency) forecasts the call on OPEC crude in 2012 at 30.2 million barrels per day. It also forecasts global oil demand will average 90.3 million barrels per day in 2012, an increase of 1.3 million over 2011.

However, the crude oil markets are expected to remain volatile throughout 2012, with the fundamentals of oil supply and demand continuing to take a back seat to the debt situation in Europe and tensions in the Middle East, with Iran in the driving seat.

“Given already very low European crude inventories, a spate of precautionary buying and escalating tensions surrounding the Iranian issue could sustain prompt prices at levels higher than otherwise, amid the growing concerns about the euro zone and weaker global economic activity for 2012.” the IEA said on 12th December.

Iran and Oil Supplies

Turning to oil supplies, the Iranian oil issue remains unclear, as the USA and its allies along with the EU are considering new sanctions on the Iranian oil as we know which increase fears that it will curb the oil supply, which will push oil prices to the upside strongly, and from the Iranian side, it said that if any sanctions happened, it will stop oil passing from the Strait of Hormuz.

European Debt

Back to Europe which remained for the past year the main factor that drive global markets, as the crisis is deepening and contagion risks are appearing, where many negative consequences can be noticed, however, hopes increased at the beginning of the year that serious measures would be implemented to halt the crisis’ train.

US Dollar and Oil Prices

On the other hand, the US dollar is encouraging crude oil to continue this upside journey, as it declined at the beginning of the year due to different factors. The ICE US Dollar Index opened the session at 80.27 and recorded a high of 80.29 then it declined to reach so far a low of 79.88, and is currently trading around 79.95.

In general, trading volumes remain mightily low, which give space for any minor factor to affect crude heavily and give it momentum, where fluctuations may be evident ahead of the American data which may add positive signs for the world’s largest economy.

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Iran threatens to stop Gulf oil if sanctions widened

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By Ramin Mostafavi
TEHRAN | Tue Dec 27, 2011 1:35pm EST

(Reuters) – Iran threatened on Tuesday to stop the flow of oil through the Strait of Hormuz if foreign sanctions were imposed on its crude exports over its nuclear ambitions, a move that could trigger military conflict with economies dependent on Gulf oil.

Western tensions with Iran have increased since a November 8 report by the U.N. nuclear watchdog saying Tehran appears to have worked on designing an atomic bomb and may still be pursuing research to that end. Iran strongly denies this and says it is developing nuclear energy for peaceful purposes.

Iran has defiantly expanded nuclear activity despite four rounds of U.N. sanctions meted out since 2006 over its refusal to suspend sensitive uranium enrichment and open up to U.N. nuclear inspectors and investigators.

Many diplomats and analysts believe only sanctions targeting Iran’s lifeblood oil sector might be painful enough to make it change course, but Russia and China – big trade partners of Tehran – have blocked such a move at the United Nations.

Iran’s warning on Tuesday came three weeks after EU foreign ministers decided to tighten sanctions over the U.N. watchdog report and laid out plans for a possible embargo of oil from the world’s No. 5 crude exporter.

“If they (the West) impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” the official Iranian news agency IRNA quoted Iran’s First Vice President Mohammad Reza Rahimi as saying.

Rahimi’s remarks coincided with a 10-day Iranian naval exercise in the Strait and nearby waters, a show of military force that began on Saturday and coincides with the heightened Western pressure on Tehran.

“Our enemies will give up on their plots against Iran only if we give them a firm and strong lesson,” Rahimi said.

JANUARY MEETING

EU ministers said on December 1 that a decision on further sanctions would be taken no later than their January meeting but left open the idea [ID:nL5E7N92VF] of an embargo on Iranian oil.

Countries in the 27-member European Union take 450,000 barrels per day of Iranian oil, about 18 percent of the Islamic Republic’s exports, much of which go to China and India. EU officials declined to comment on Tuesday.

About a third of all sea-borne oil was shipped through the Strait of Hormuz in 2009, according to the U.S. Energy Information Administration (EIA), and U.S. warships patrol the area to ensure safe passage.

Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq – together with nearly all the liquefied natural gas from lead exporter Qatar – must slip through the Strait of Hormuz, a 4-mile wide shipping channel between Oman and Iran.

Iran has also hinted it could hit Israel and U.S. interests in the Gulf in response to any military strike on its nuclear installations – a last resort option hinted at by Washington and the Jewish state.

However, some analysts say Iran would think hard about sealing off the Strait since it could suffer just as much economically as Western crude importers, and could kindle war with militarily superior big powers.

“To me, if Iran did that it would be a suicidal act by the regime. Even its friends would be its enemies,” said Phil Flynn, analyst at PFG Best Research in Chicago.

SAUDI REPLACEMENT?

Industry sources said on Tuesday No. 1 oil exporter Saudi Arabia and other Gulf OPEC states were ready to replace Iranian oil if further sanctions halt Iranian crude exports to Europe.

Iranian Oil Minister Rostam Qasemi had said that Saudi Arabia had promised not to replace Iranian crude if sanctions were imposed.

“No promise was made to Iran, its very unlikely that Saudi Arabia would not fill a demand gap if sanctions are placed,” an industry source familiar with the matter said.

Gulf delegates from the Organization of the Petroleum Exporting Countries (OPEC) said an Iranian threat to close the Strait of Hormuz would harm Tehran as well as the major regional producers that also use the world’s most vital oil export channel.

Oil prices spiked on Tuesday, fuelled by fears of supply disruptions and Iranian naval exercises in a crucial oil shipping route, with gains capped by simmering euro zone debt concerns.

Crude oil futures jumped nearly a dollar to over $109 a barrel after the Iranian threat, but a Gulf OPEC delegate said the effect could be temporary. “For now, any move in the oil price is short-term, as I don’t see Iran actually going ahead with the threat,” the delegate told Reuters.

The industry source said that in the case of EU sanctions, Iran would most likely export more of its crude to Asia, while Gulf states would divert their exports to Europe to fill the gap until the market is balanced again.

A prominent analyst said that if Iran did manage to shut down the Strait of Hormuz, the ensuing spike in oil prices could wreck the global economy, so the United States was likely to intervene to foil such a blockade in the first place.

“First, the U.S. will probably not allow Iran to close the Strait. That’s a major economic thoroughfare and not just for oil. You shut that Strait and we are talking a major hit on many Middle East economies,” said Carl Larry, president of Oil Outlooks in New York.

“Second, there is no way that the Saudis (alone) have enough oil or quality of oil to replace Iranian crude. Figure Saudi spare capacity is 2 to 4 million at best. Of that spare, about 1-2 million is real oil that is comparable out of Iran. Lose Iran, lose 3.5 million barrels per day of imports. No way.”

French President Nicolas Sarkozy proposed hitting Iran with an oil embargo and won support from Britain, but resistance to the idea persists within and outside the European Union.

An import ban might raise global oil prices during hard economic times and debt-strapped Greece has been relying on attractively financed Iranian oil.

Iran’s seaborne trade is already suffering from existing trade sanctions, with shipping companies scaling down or pulling out as the Islamic Republic faces more hurdles in transporting its oil.

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

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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

Holiday Greeting’s From Iran: Grim, Cynical and Desperate

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Austin Bay

Iran‘s tyrannical regime has sent the world what passes for a holiday greeting in contemporary Tehran — a grim and cynical threat.

This week, a member of Iran’s National Security Committee intimated that Iran would soon demonstrate that it could close the Strait of Hormuz to oil tanker traffic. Paryiz Saryari, a member of Iran’s sham parliament, added this bit of rhetorical fire: “If the world wants to make the region (i.e., Iran) insecure, we will make the world insecure.”

The Strait of Hormuz connects the oil-rich Persian Gulf region to the Gulf of Oman and the Indian Ocean. Closing the Strait to shipping effectively imposes a naval blockade on the Arab states along the Gulf’s littoral. That’s grim, for it amounts to waging war on several US allies, including Iraq and Saudi Arabia.

It gets grimmer. On any given day, some 30 percent of the globe’s seaborne oil supply sails through the geographic choke-point; thus closing the Strait threatens international energy security.

Missiles and mines bolster Saryari’s bombast. Iran possesses sufficient military forces to seal the channel. Anti-ship mines, high-speed anti-ship missiles and torpedoes pose the biggest problems. Iran also has a few submarines. Strikes by suicide aircraft and swarm attacks by suicide speedboats are possible.

Yes, this is a grim scenario, and in the looming future grimmer still, once Iran’s Khomeinist despots possess nuclear weapons — which they don’t, not yet … we hope.

Cynics argue that the ayatollahs’ cynicism, which is as amply evident as is their corruption, will keep Hormuz open. Immediately following Saryari’s threat, world oil prices spiked three to four dollars. Iranian government oil traders, given a heads-up that the verbal threat was coming, could have made millions, with the cash lining a Revolutionary Guard officer’s pocket, or an ayatollah’s robe, or going into an account to illicitly purchase nuclear weapon detonators.

An uncertain logic undergirds this cynical read. The ayatollahs know that actually closing the strait amounts to a self-blockade. Iran’s major oil-exporting seaports lie on the Persian Gulf (e.g., Kharg Island). The regime buys what domestic peace it enjoys with oil money. Choke the strait, and the ayatollahs strangle themselves. So they won’t do it, if economic logic overrides theological millenarianism.

Economic logic, however, does not guide the ayatollahs’ nuclear quest. If they ditched their nukes, sanctions would end and the threat of U.S. or Israeli attack would drastically diminish. Yet the centrifuges continue to spin; so do threats to annihilate Israel. Last month, Iran threatened to attack missile defense radar sites in Turkey.

The grim consequences of closing Hormuz are why Western and Persian Gulf Arab militaries are prepared to defend the strait, break any Iranian blockade and clear the strait of mines.

The grim consequences of Iran’s regime acquiring nuclear weapons are why U.S. spy drones scrutinize Iranian nuclear facilities and why mysterious bomb blasts (Mossad at work?) plague Iranian labs. It appears the Obama administration has finally understood that negotiations and sanctions won’t halt the quest and that the Bush administration was right — the ayatollahs are hellbent on nukes. So the Obama Administration has decided to wage a covert war on Iranian nuclear capabilities.

That alone, however, does not explain the desperate quality of Iran’s recent belligerency. Domestically, the regime survives by threatening its people with its street thugs and secret police. Syria’s dictatorship (an Iranian ally) has failed to crush its rebels with these brutal tools.

That seeds desperation in Tehran, but Tunisia may be a bigger source of concern.

As Hussein Ibish noted at NOWLebanon.com, recent “bickering” among Tunisian parliamentarians was delightful because “there was no monarch, no dictatorship, no junta or oppressive military, no killings, no militias, no riots and no hint of civil conflict, foreign interference or invasion” present. Another democracy is emerging in a culturally Islamic society. It’s fragile, but for Iran’s tyrants, it is to be feared

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Oil surges on speculation of supply disruption, U.S. stimulus

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Oil surged above $100 a barrel on speculation supplies will be disrupted after a report that Iran will hold drills to close the Strait of Hormuz and that the Federal Reserve may announce additional stimulus measures.

Crude advanced as much as 3.6 percent after the state-run Fars news agency reported the military maneuvers will be “soon,” citing Parvis Sorouri, a member of the parliament’s national security and foreign policy committee. The Strait of Hormuz is a bottleneck for oil exports from the Persian Gulf. The Fed is scheduled to release a statement on monitory policy later today.

“There have been a number of rumors floating around the market today,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “I saw the Iran story yesterday but those headlines seem to have got traction this morning. There are also rumors for further action by the Fed, but where they come from I don’t know. In this electronic world things can jump quickly and trigger stops.”

Crude for January delivery gained $1.91, or 2 percent, to $99.68 a barrel at 11:07 a.m. on the New York Mercantile Exchange. Earlier, futures touched $101.25 a barrel. Prices have risen 9.1 percent this year.

Brent oil for January settlement increased $2.07, or 1.9 percent, to $109.33 a barrel on the London-based ICE Futures Europe exchange.

“There are no headlines to explain this move,” said Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania. “One has to look at the usual suspects. It was probably a fat-fingered mistake or a margin call.”

Iran Statement

Crude pared gains after an Iranian Foreign Ministry spokesman said the Strait of Hormuz isn’t closed. The comments on the strait were made by people who don’t have an official title, said Ramin Mehmanparast, the spokesman.

Sorouri, in comments that first appeared yesterday on the website of the state-run Iranian Students News Agency, said “if the world wants to make the region insecure, we will make the world insecure.”

About 15.5 million barrels of oil a day, about a sixth of global consumption, flows through the Strait of Hormuz between Iran and Oman, according to the U.S. Department of Energy.

“This is the kind of story that sends a shock wave through the market,” said Richard Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.

The market also rose on speculation that the Fed will announce a third round of bond purchases in a tactic that has been dubbed quantitative easing. The Fed bought a total of $2.3 trillion in bonds in two rounds of quantitative easing from December 2008 until June 2011.

Fed Chairman Ben S. Bernanke and his policy-making colleagues plan to meet today to discuss the outlook for an economy that has strengthened since their November meeting, lowering the jobless rate to 8.6 percent from 9.1 percent.

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Iran To Practice Closing Strait Of Hormuz

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Closure of key choke point would send oil prices skyrocketing to $300-$500 a barrel

Paul Joseph Watson
Infowars.com
Monday, December 12, 2011

The Iranian Army has refused to comment after a member of the country’s National Security Committee said today that Iran was to practice closing the Strait of Hormuz, the most important choke point for oil shipments in the world.

“The legislator, Parviz Sarvari, told the student news agency ISNA: “Soon we will hold a military manoeuvre on how to close the Strait of Hormuz. If the world wants to make the region insecure, we will make the world insecure,” reports Reuters.

The Straight of Hormuz, just 34 miles wide at its narrowest point, is a key transport passage for petroleum exporting countries from the Persian Gulf, with the 15.5 million barrels of oil that pass through it each day representing 33% of the world’s total oil shipments.

The Iranian military refused to comment on the report, but Iran has repeatedly threatened to close the shipping channel in the event of a US or Israeli-led attack, a potential action the United States has characterized as an act of war.

Following speculation that sanctions would be placed on Iranian oil exports, Foreign Ministry spokesman Ramin Mehmanparast warned last week that oil prices would soar above $250 dollars barrel.

In response , US Defense Secretary Leon Panetta stated, “Any disruption of the free flow of commerce through the Persian Gulf is a very grave threat to all of us and a red line for the US.”

Experts have forecast that a 30 day closure of the Strait of Hormuz would send oil prices skyrocketing to between $300-$500 dollars a barrel, a level that would trigger global economic instability and cost the U.S. nearly $75 billion in GDP.

As we reported last week, the United States has deployed a total of three warships to the Middle East, along with several other attack boats, as tensions in the region escalate.

With the USS John C. Stennis already stationed just outside Iranian territorial waters, the the USS Abraham Lincoln and the USS Carl Vinson are on their way to join her.

The United States now has a total of five major aircraft carriers deployed around the world, the same number of warships that were in action shortly before the invasion of Iraq in early 2003.

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Paul Joseph Watson is the editor and writer for Prison Planet.com. He is the author of Order Out Of Chaos. Watson is also a regular fill-in host for The Alex Jones Show.

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