Iran has taken the first step towards military intervention in the Strait of Hormuz — a move that could skyrocket global oil prices and open the gates for a larger armed confrontation.
A day after the European Union (EU) imposed an oil embargo, the National Security and Foreign Policy Commission of the Iranian Parliament moved swiftly. It drafted a bill which permitted the government to stop oil tankers passing through the Strait of Hormuz that ferry crude oil for countries that had targeted Iran with harsh oil and financial sanctions.
“This bill has been developed as an answer to the European Union’s oil sanctions against the Islamic Republic of Iran,” said Ibrahim Agha-Mohammadi, an Iranian law maker. If the Strait of Hormuz is blocked, it will swiftly become a global event since nearly 20 per cent of the world’s oil supplies pass through this narrow passage on the edge of the Gulf.
Iran is the second-biggest oil producer after Saudi Arabia in OPEC, the oil cartel. The Paris based International Energy Agency (IEA) is forecasting that once sanctions are fully in place in the second half of this year, the world oil markets would lose a daily supply of around one million barrels — a standalone factor that would encourage higher oil prices. Mohammad Ali Khatibi,
Iran’s governor to OPEC, has warned that the EU, whose economic woes are multiplying, would bear “the consequences of politicising the market”.
The EU has suspended oil imports from Iran, in coordination with the United States, to pressure Tehran to engage in negotiations to guarantee that Iran’s nuclear programme was a peaceful one. Exports have been further affected because insurance companies in the EU are no longer covering tankers exporting Iranian crude to non-European destinations.
Analysts say the lifting of insurance cover by EU companies is likely to affect Iranian exports to China, India, South Korea and Japan. With Asian markets vital to Iran’s economic wellbeing, Tehran has already approached South Korea with an offer to import oil in Iranian tankers, not dependent on EU insurance cover.
On Tuesday, Iran’s Foreign Ministry spokesman Ramin Mehamanparast described the imposition of oil sanctions as “provocative and threatening”. He forewarned advocates of sanctions that their actions would be counterproductive and predicted that they were certain to painfully rebound on them. “They [supporters of sanctions] should account for their actions and accept the consequences of such decisions which will include social and economic crises in the western countries.”
As it prepared to counter the impact of sanctions, Iran cautioned that adoption of stringent restrictions could impact the on-going cycle of nuclear talks between Iran and the P5+1, comprising the five permanent members of the security council and Germany.
Technical experts from these countries met on Tuesday in Istanbul, amid uncertainty about the prospects of another round of talks at the political level.
With relations between Iran and the West touching a new low after the imposition of the latest sanctions, Iran seemed to express its fury by unleashing a barrage of missiles during a military exercise on Tuesday. Codenamed Prophet 7, a slew of missiles of various ranges was fired during the exercise, some targeting replica of American bases in the region, Iran’s Fars News Agency (FNA) reported.
