Forum Post: Iran to hold war game on closure Hormuz Strait: MP / Oil: Iran's Hormuz Strait Threats Could Wreak Global Economic Havoc
Posted 10 years ago on Dec. 13, 2011, 2:03 p.m. EST by puff6962
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Iran to hold war game on closure Hormuz Strait: MP
TEHRAN – MP Parviz Sorouri of the Majlis National Security and Foreign Policy Committee has said that Iran plans to practice its ability to close the Strait of Hormuz, one of the world’s most strategically important chokepoints, which represents about 30% of the world’s seaborne oil shipments.
“Currently, the Middle East region supplies 70 percent of the world’s energy needs, (most of) which are transported through the Strait of Hormuz. We will hold an exercise to close the Strait of Hormuz in the near future. If the world wants to make the region insecure, we will make the world insecure,” ISNA quoted Sorouri as saying on Tuesday.
Hossein Shariatmadari, the chief editor of the Kayhan newspaper, in the editorial of the December 13 edition of the daily, also said that under the United Nations Convention on the Law of the Sea (UNCLOS), the Islamic Republic has the right to close the Strait of Hormuz if its interests in the waterway are threatened.
Pointing to efforts made by certain Western countries to drum up support for the imposition of an oil embargo on Iran, he said that the UNCLOS allows Iran to close the waterway if it is deprived of its right to export oil.
If oil sanctions are imposed on Iran, there is no reason to allow the enemies that are known for their hostility toward Iran to ship oil through the strait, which lies within Iran’s territorial waters, he said.
Shariatmadari also cited excerpts of some articles of the UNCLOS to support his argument, which goes as follows:
Article 17 - Right of innocent passage Subject to this Convention, ships of all States, whether coastal or land-locked, enjoy the right of innocent passage through the territorial sea.
Article 19 - Meaning of innocent passage:
Passage is innocent so long as it is not prejudicial to the peace, good order or security of the coastal State. Such passage shall take place in conformity with this Convention and with other rules of international law.
Article 25- Rights of protection of the coastal State:
A: The coastal State may take the necessary steps in its territorial sea to prevent passage which is not innocent.
B: The coastal State may, without discrimination in form or in fact among foreign ships, suspend temporarily in specified areas of its territorial sea the innocent passage of foreign ships if such suspension is essential for the protection of its security, including weapons exercises. Such suspension shall take effect only after having been duly published.
In conclusion, Shariatmadari said that if the United States, European countries, and their Asian allies like Japan impose oil sanctions on Iran, they will be effectively considered the enemies of the Islamic Republic and the passage of the tankers that carry oil for them cannot be regarded as “innocent”, so Iran can block the passage of the tankers to prevent the enemies, which seek to undermine its national security, from improving their capabilities.
Oil: Iran's Hormuz Strait Threats Could Wreak Global Economic Havoc
Crude oil prices surged on Tuesday on reports that Iran was set to begin war games in the Strait of Hormuz to practice closing down the key chokepoint which concentrates 30% of global seaborne oil shipments. Prices retracted a little after Iran’s Foreign Ministry confirmed the Strait remained open, and as OPEC cut its 2012 demand forecast by 100,000 barrels per day to 1.1 million daily barrels given a cooling global economy.
There is little doubt that geopolitical concerns will remain a key factor for commodity prices in 2012. Added to the Eurozone sovereign debt and competitiveness crisis and a surging budget deficit in the U.S. and U.K., conflict risk in the Middle East has escalated.
Exemplified in Tuesday’s price action, Iran’s influence on global crude oil prices is substantial. West Texas Intermediate crude prices broke the $100 mark after surging 3.5% in New York Tuesday morning to $101.25 per barrel while Brent crude, the international benchmark, jumped 3.6% to $111.10.
The pop in crude oil prices came after Iranian MP Parviz Sorouri of the Majlis National Security and Foreign Policy Committee said:
Currently, the Middle East region supplies 70 percent of the world’s energy needs, (most of) which are transported through the Strait of Hormuz. We will hold an exercise to close the Strait of Hormuz in the near future. If the world wants to make the region insecure, we will make the world insecure.
The comments, picked up by the quasi-official Iranian Student News Agency, and reported by the Tehran Times, were later complemented by a statement by the Iranian Foreign Ministry noting the Strait remains open, according to Bloomberg.
Hormuz is one of the world’s most important waterways, with daily flow of about 15 million barrels of oil. That’s 90% of Persian Gulf Exports and 40% of global consumption, according to geopolitical analysts at Stratfor.
“The importance of this waterway to both American military and economic interests is difficult to overstate. Considering Washington’s more general — and fundamental — interest in securing freedom of the seas, the U.S. Navy would almost be forced to respond aggressively to any attempt to close the Strait of Hormuz,” explained analysts at Stratfor. Iran’s intentions, though, are to avoid an attack and therefore would use the threat for deterrence rather than as an offensive or defensive action.
Iran is being pushed by what the analysts call a “covert intelligence war” carried on by the U.S., Israel, and other U.S. allies. A recent U.S. drone, shot down over Iranian airspace, added to other recent examples of escalation like “the defection to the West of Iranian officials with knowledge of Tehran’s nuclear program; the Iranian seizure of British servicemen in the Shatt al Arab Waterway; the assassination of Iranian nuclear scientists; the use of the Stuxnet worm to cripple Iranian uranium enrichment efforts,” according to Stratfor.
On the markets front, Iran could cause substantial crude oil price movements if it chose to take action. From Stratfor:
A single ship striking a naval mine (or even a serious Iranian move to sow mines) could quickly and dramatically drive up global oil prices and maritime insurance rates. This combination is bad enough in the best of times. But the Iranian threat to the Strait of Hormuz could not be more effective than at this moment, with the world just starting to show signs of economic recovery. The shock wave of a spike in energy prices — not to mention the wider threat of a conflagration in the Persian Gulf — could leave the global economy in even worse straits than it was a year ago.
Crude oil prices are set to remain high, despite OPEC’s bearish call that demand will be lower than expected. Citi’s analysts expect global oil demand, and supply, to hit 90.3 million barrels per day, pushing Brent to an average $110 per barrel and WTI to $100 through 2012. The reversal of the Seaway Pipeline, recently sold by Conoco Phillips to Enbridge, will provide further support for WTI prices, as the bottleneck at Cushing, Oklahoma is eased and crude begins to flow into refineries owned by Exxon Mobil, BP, Marathon Petroleum, Valero Energy, and others.