Iran’s threats to Gulf navigation ratchet up tensions with the US
BEIRUT - Iran, increasingly cornered by US President Donald Trump’s diplomatic offensive to bring it to its knees, is threatening to cut off energy exports through the Arabian Gulf if economic sanctions are reimposed.
The US State Department announced that countries buying Iranian oil must cut off all imports by November 4 or face “financial measures” — with no exceptions among US allies.
However, officials from all nuclear agreement signatories — except the United States — on July 6 said they were committed to “the continuation of Iran’s export of oil and gas” with a series of initiatives “aimed at preserving the nuclear deal, which is in the security interest of all.” Their agreement does not affect the calendar of the US announced sanctions or the escalating showdown between Tehran and Washington.
The cut-off of Iranian imports, if enforced, would greatly stiffen US efforts to cripple the Tehran regime’s expansionist ambitions in the Middle East through an economic blockade.
Iran’s threat centres on the choke point Strait of Hormuz, the only way in and out of the Gulf and through which one-third of globally traded oil passes daily.
The US Navy declared that it stands “ready to ensure the freedom of navigation and the free flow of commerce” through the narrow channel which links the Gulf to the Arabian Sea.
The Bahrain-based US Navy’s 5th Fleet is without its usual aircraft carrier battle group. The USS Theodore Roosevelt left the region in May and has not been replaced. However, the USS Harry S. Truman is in the Mediterranean and could be sent to the Gulf to boost US naval power for any confrontation with Iran.
The amphibious warship USS Iwo Jima, carrying attack helicopters and a US Marine Corps force, arrived in the Gulf in early June to reinforce the 5th Fleet.
The Tehran regime has threatened to close Hormuz several times in recent years, although it has never indicated how it would do that. It has the capability to mine the 280km waterway, as it did amid naval clashes with the US Navy during the 1980-88 Iran-Iraq war, when both states attacked tankers in the Gulf.
Iran’s navy is no match for the Americans’ overwhelming firepower but it has a substantial arsenal of anti-ship missiles in coastal batteries on the eastern Iranian shore of the Gulf, including Hormuz.
Iran’s threats in the face of Trump’s actions have sharply intensified tensions in the Middle East at a critical juncture as Tehran builds up its military forces in south-western Syria in a face-off with Israel amid fears of open conflict between the two regional powers.
Trump has been pressuring Tehran since May 8 when he unilaterally withdrew the United States from the landmark 2015 nuclear agreement with Iran and reinstated some sanctions because he considered the pact did not go far enough in preventing Tehran from developing atomic weapons.
That has alarmed US allies such as Britain, Germany and France, which, along with China and Russia, also signed the pact to ease international sanctions against Iran in return for it curtailing its contentious nuclear programme.
The resulting standoff, echoing previous confrontations in the Gulf, could seriously reduce global oil and gas supplies. Iran exported 1.9 million barrels per day (bpd) in the first quarter of the year.
Saudi Arabia, the world’s largest producer, has pledged to boost its output to make up for the anticipated Iranian shortfall by at least 1 million bpd.
Iranian President Hassan Rohani, speaking to Iranian expatriates in Switzerland on July 2, warned that if Iran’s oil exports were threatened by US action, so would all others in the region.
“It seems they do not understand what they are saying when they say Iran will not be allowed to export even a single drop of oil,” Rohani declared. “All right — if you can do such a thing, do it and see the result!”
He declined to elaborate but Iran’s Islamic Revolutionary Guard Corps warned on July 4 it would block Hormuz if Iran’s crude oil sales are halted.
The combined loss of oil exports would have a severe global effect and analysts say a prolonged stoppage could send the price of oil to as much as $200 per barrel. The current price is around $80.
The prospect of a severe slump in Tehran’s hard currency earnings from oil exports has triggered a panicked flight of currency from the already imperilled rial, Iran’s currency, into dollars because of sanctions.
The rial’s collapse, food price hikes and record unemployment have ignited serious country-wide protests, which have been curtailed by heavy-handed security forces.
An outbreak of mass protests in December and January resulted in a major crackdown and demands for action by Rohani’s reformist government to ease the burden on Iran’s 80 million population but most analysts agree an economic recession is inevitable.
Iran has much experience in coping with international sanctions and dramatic fluctuations in its oil earnings but it has faced mounting economic woes since Trump became president. The impending loss of vital oil income could be crippling and politically explosive.