American Infidels

Never make idol threats, you just might get what you asked for..

A senior Iranian official on Tuesday delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply. European Union leaders have also called for more sanctions against Iran by the end of January but have made no explicit call for an embargo on Iranian crude imports. The bloc is considering an embargo on Iranian oil exports that would block the sale of about 450,000 barrels a day from Iran into the EU

The declaration by Iran’s first vice president, Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation that, if fully implemented, could substantially reduce Iran’s oil revenue in a bid to deter it from pursuing a nuclear weapons program. “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” he stated according to Iran’s official news agency. (Iran is currently having war games for 10 days in the area)

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. Top oil exporter Saudi Arabia and other Gulf OPEC states are ready to replace Iranian oil if further sanctions halt Iranian crude exports to Europe, industry sources said on Tuesday. Iran’s Oil Minister Rostam Qasemi had said that Saudi Arabia had promised not to replace Iranian crude if sanctions are 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, who declined to be named, told Reuters. “If the sanctions take place, the price of oil in Europe would increase and Saudi and other Gulf countries would start selling there to fill the gap and also benefit from the higher price,” said a second industry source who declined to be named.

Benchmark U.S. crude oil futures jumped nearly a dollar to over $100 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.

However in Asia, China is already driving a hard bargain. China’s top refiner Sinopec Corp said it would cut its January crude imports from Iran by half, in attempt to discount prices, trade sources told Reuters in December. A long-term disruption in the volume of supplies China buys would strengthen the impact on Iran of new U.S. and EU sanctions. Industry sources believe the dispute will likely be short lived, as Iran would back down if it fears it will lose market share in China.

When the sanctions come, a naval blockade is sure to follow. Time to call the bluff and up the ante

UPDATE 1

Dec 28 (Reuters) – The U.S. Fifth Fleet said on Wednesday it will not allow any disruption of traffic in the Strait of Hormuz, after Iran threatened to stop ships moving through the strategic oil route.”The free flow of goods and services through the Strait of Hormuz is vital to regional and global prosperity,” a spokesperson for the Bahrain-based fleet said in a written response to queries from Reuters about the possibility of Iran trying to close the waterway.”Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated.”Asked whether it was taking specific measures in response to the threat to close the Strait, the fleet said it “maintains a robust presence in the region to deter or counter destabilizing activities”, without providing further detail.