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Region Considers Options as Iran Threatens to Close Key Oil Route
1 Jul 08
Gulf States have suggested that they are in talks to secure oil supplies amid Iranian threats to block the region’s main commercial gateway, the Strait of Hormuz, should the Islamic Republic come under attack.
Global Insight Perspective | | Significance | The plans are likely to have received new urgency after Iran’s revolutionary guards threatened to impose controls on shipping in the vital gulf route if the country, which remains under the international spotlight for failing to halt its uranium-enrichment programme, was attacked. | Implications | Although the likelihood of such an attack still remains extremely low, the threat is expected to be sufficient to unnerve regimes in the Gulf and push them to consider their options. | Outlook | The new threats are likely to ensure that the issue of the Strait of Hormuz will continue to dominate the headlines in coming weeks as the international community moves to step up the pressure on the Iranian regime over its nuclear programme. |
Saudi and Kuwaiti leaders are reportedly in new discussions over alternative ways to secure its oil exports in case of an emergency affecting supply routes; this follows suggestions that the Strait of Hormuz could be blocked in the event of Iran being attacked, according to Arab daily Al Rai. Existing contingency plans are likely to receive new urgency following threats made by the state’s military Iranian Revolutionary Guards (IRG) last week. IRG commander Mohamed Al Jafari warned last week that Teheran would use every means available to close down the strategic waterway between Iran and Oman at the mouth of the Persian Gulf if attacked. Jafari told Iranian daily Jame-Jam that "naturally every country under an attack by an enemy uses all its capacity and opportunities to confront the enemy" and suggested that "Iran can definitely act to impose control on the Persian Gulf and Strait of Hormuz". He also suggested that should there be a confrontation between "us and the enemy" the scope of the confrontation will also "reach the oil issue"; adding that should Iran impose control on the Gulf waterway, oil prices could rise considerably. Responding to the threats, the United States has said that it would not allow Iran to hamper oil shipments through the Strait of Hormuz. The U.S. navy’s Bahrain-based Fifth Fleet warned today that Iran would not be allowed to close the strait: "They will not close it," said Lieutenant Nate Christensen; "The Strait of Hormuz is vital international waters." Tension over a potential strike against Iran has been increasing following a report published in the New York Times on June 20 that more than 100 Israeli F16 and F15 fighter planes took part in a military exercise over the eastern Mediterranean and Greece during the first week of June. U.S. officials told the paper that the manoeuvre appeared to be training for a possible attack on Iran’s nuclear sites. The Revolutionary Guards’ chief also warned that Iranian missiles are capable of hitting deep within Israel if it launched any attack against his country, either alone or in collaboration with the United States. On 7 June, Israel’s deputy prime minister suggested that a unilateral attack on Iran was "unavoidable". Transport minister and Kadima party heavyweight, Shaul Mofaz, made the statement in an interview published by Israeli daily Yediot Ahronot, prompting widespread international controversy. Contrary to Israel’s official position on Iran, Mofaz (who is also Israel’s former defence minister) suggested that international sanctions would be ineffective in attempting to persuade Tehran to abandon its controversial uranium-enrichment programme. The minister’s statement was criticised for undermining efforts to introduce yet more sanctions against the Iranian regime. Outlook and Implications: According to the head of Kuwait’s Petroleum Cooperation, Saad al-Shawib there are already plans to "export crude in cooperation with the [Gulf Cooperation Council] GCC, but they have yet to be finalised”, adding that military tension could see oil prices spiralling out of control according to The Media Line. Although the likelihood of such an attack still remains extremely low, the threat is continuing to cause concern and is clearly pushing Gulf countries to reconsider their options. The issue of the Strait of Hormuz, which handles the shipment of around a fifth of the world’s crude, will continue to dominate the headlines in coming weeks as the international community moves to step up the pressure on the Iranian regime over its nuclear programme. Under the current circumstances, with frenzied oil markets Iran’s sabre-ratting will take on a more "poignant" meaning as to the impact the risk premium has placed on oil prices. Despite the general consensus on the importance of the Strait of Hormuz, there is little research on whether such a blockade is indeed possible and what the consequences will be. Most people believe that U.S. military superiority would deter any such campaign. Others believe that although possible, even if the strait were not closed off in the sense of being physically barricaded, military conflict could cause prices to skyrocket mere anticipation of supply disruptions.
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