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US, Israel to “challenge” Iran

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Garibov Konstantin

The United States and Israel are due to hold the Austere Challenge-12 military exercise in the Middle East to train troops in interacting in antimissile and antiaircraft defences, and also to boost coordination of action by Israeli and US Army servicemen.

The war games will prove the largest-scale ones in the two countries’ military cooperation history. Thousands of US and Israeli Army servicemen, dozens of ships and deck-based aircraft are due to take part.

The two countries held the war games of similar scale three years ago. In autumn 2009, more than a thousand US Army servicemen helped the Israelis to service antiaircraft batteries, and drilled joint action of the two countries’ troops to deal with a likely military conflict in the region. Tehran took the war games as an unprecedented pressure that was brought to bear on the Islamic Republic.

The Pentagon now claims that the military exercise was planned long ago and should by no means be seen as a response to Iran’s Wilayat-90 military exercise, which drew to a close in the Strait of Hormuz on January 4th . But according to reports late last month, the US-Israeli military exercise was originally due in spring this year. Experts claim that it is Tehran’s successful testing of two Iran-made Gader anti-ship cruise missiles that prompted the US and Israel to reconsider the time of their military exercise and hold it at an early date. Gader missiles are capable of hitting targets at a distance of 200 kilometres. Besides, the Pentagon Chief Leon Panetta pledged to go to any lengths to prevent Iran from developing nuclear weapons.

Adding fuel to the fire in the region, as it were, is the raging political crisis in Syria, as well as Iran’s recent threat to block the Strait of Hormuz, which is unacceptable to the United States. In the event of a US-Israeli military conflict with Iran, fighting may spread to the entire region, an expert with the Russian Academy of Sciences’ Institute for Oriental Studies Liudmila Koulagina says, and elaborates.

“The Middle East nations, Liudmila Koulagina says, are clearly opposed to any fighting in the region on the understanding that even an airstrike on Iran will inevitably provoke Iran’s retaliatory strikes on a number of neighbouring countries. Fighting would inevitably sweep the entire region. Now, this is the worst-case scenario for the Middle East, since it is a major oil region and a home to US closest allies, such as Saudi Arabia. Any fighting in the Middle East would prove a great error.”

Meanwhile Tehran has said that it will soon hold yet another military exercise, namely one in the Strait of Hormuz and the Persian Gulf in February. The exercise will be titled the way it has been in the past seven years, Great Prophet, but the Iranian military warns there’ll be some changes made, without bothering to specify. Now, if Austere Challenge-12 happens to coincide with Great Prophet, which is not at all impossible, the Middle East will for the first time ever become the scene of two biggest simultaneous war games.

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Iran plans more war games in strait as sanctions bite

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By Robin Pomeroy
TEHRAN | Fri Jan 6, 2012 8:03am EST

(Reuters) – Iran announced plans on Friday for new military exercises in the world’s most important oil shipping lane, the latest in weeks of bellicose gestures towards the West as new sanctions threaten Tehran’s oil exports.

Real Admiral Ali Fadavi, naval commander of the Revolutionary Guards Corps, said exercises next month would focus directly on the Strait of Hormuz, which leads out of the Gulf and provides the outlet for most Mid-East oil.

Iran held a 10-day drill which ended on Monday in neighboring seas.

“Today the Islamic Republic of Iran has full domination over the region and controls all movements within it,” Fadavi said in remarks reported by the Fars news agency.

Iranian officials have threatened in recent weeks to block the strait if new sanctions harm Tehran’s oil exports, and this week said they would take action if the United States sails an aircraft carrier through it.

The United States, which has a massive naval fleet in the area that is overwhelmingly more powerful than Iran’s sea forces, says it will ensure the international waters of the strait stay open. Britain said on Thursday that any attempt to close it would be illegal and unsuccessful.

New financial sanctions signed into law by U.S. President Barack Obama on New Year’s Eve are aimed at making it difficult for most countries to buy Iranian oil. The European Union is expected to announce tough measures of its own at the end of the month.

Most traders believe Iran will still be able to find buyers, at least in the short term, for its exports of 2.6 million barrels of oil per day (bpd). But it may have to offer steep discounts that reduce the hard currency revenue it needs to feed its 74 million people.

The sanctions are already having an effect on Iran’s streets, where prices have been rising and the rial currency is falling. Iranians have been queuing up at banks to convert their savings into dollars.

The economic hardship comes less than two months before a parliamentary election, Iran’s first since a 2009 presidential election that led to mass street protests across the country.

Iran’s rulers successfully put down those demonstrations two years ago with force, but since then the Arab Spring has shown the vulnerability of authoritarian governments in the region to public protest fueled by anger over economic hardship.

NUCLEAR PROGRAMME

Washington and its allies are imposing the measures to force Iran to abandon a nuclear program which they say is aimed at producing an atomic bomb. Iran says the program is peaceful.

European Union officials say the EU, which collectively buys about 500,000 bpd of Iranian oil, rivaling China as the largest market, has agreed to impose an embargo halting all imports.

EU diplomats said they are discussing how long they will give member countries to halt purchases, with France, Germany and others wanting the ban imposed within three months but Greece favoring a grace period of up to a year.

China has also cut its imports by more than half in January and February while haggling with Tehran over the size of the discount it wants in return for doing business with it.

Other big buyers, including Turkey and Japan, say they are seeking a waiver from the U.S. sanctions.

The new American law allows Obama to give temporary waivers to allies to continue to buy Iranian oil to prevent a price shock, but to receive the permits, countries are meant to show they are reducing trade with Iran.

Iran has put on a brave face over the sanctions. Foreign Minister Ali Akbar Salehi said on Thursday the country would “weather the storm.”

“Iran, with divine assistance, has always been ready to counter such hostile actions and we are not concerned at all about the sanctions,” he told a news conference.

But in a sign it is seeking to alleviate the pressure, Salehi said Tehran was interested in resuming negotiations over its nuclear program with Western powers.

Turkey’s visiting foreign minister brought an offer from Catherine Ashton, the EU foreign policy chief who negotiates on behalf of major powers.

Talks over Iran’s nuclear program collapsed a year ago. Iran has repeatedly offered to restart the talks since then, but has insisted it will not negotiate over its right to continue enriching uranium.

Western countries say talks are pointless unless a halt to enrichment is on the table. Enriched uranium can be used to fuel a reactor or build a bomb.

OIL PRICES IN SPOTLIGHT

After years of sanctions that had little impact, Western countries have adopted a far more direct approach in recent months, with sanctions that explicitly impact the oil industry that provides 60 percent of Iran’s economy.

The new U.S. measures would cut off any institution that deals with the Iranian central bank from the U.S. financial system. If implemented fully, it would make it impossible for most countries’ refineries to buy Iranian crude.

But Washington has to balance its determination to isolate Tehran with concern that driving its oil off markets will raise prices and hurt the fragile global economy. Brent crude futures hovered above $113 a barrel on Friday, up nearly $7 since Obama signed the new sanctions law.

To ease the impact on markets, the new U.S. measures take effect over several months, and the leeway given to Obama to offer waivers allows countries time to find other suppliers. Saudi Arabia, the world’s biggest oil exporter and a foe of Iran, says it will make up for any supply shortfall.

Traders and analysts believe it is unlikely Iran will actually carry out its threats to block the strait.

“We’ve seen this movie before,” said Cliff Kupchan, an Iran analyst at the Eurasia Group. “Neither side wants a war. A lot of this rhetoric is overstated.”

Even if it tried, Iran could not blockade the strait for long in a direct challenge to a U.S. fleet led by the giant supercarrier John C. Stennis, accompanied by a guided-missile cruiser and flotillas of destroyers and submarines.

The Combined Maritime Force protecting Gulf shipping also includes other countries such Britain, France, Canada, Australia and the Gulf Arab states, under the command of a U.S. admiral.

Still, Iran has many ways it could provoke a Western response, from missiles within range of U.S. targets in the region, to small boats that could attack a ship near shore, to allied militia in Palestine and Lebanon that can strike Israel.

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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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