Iran threatens to choke route of oil shipments

Iran threatens to choke route of oil shipments

By David E. Sanger and Annie Lowrey
New York Times
Posted: 12/27/2011 07:01:14 PM PST
Updated: 12/27/2011 08:03:50 PM PST

WASHINGTON -- A senior Iranian official 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,
The declaration by Iran's first vice president, Mohammad-Reza Rahimi, came as President Barack 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.
Before the latest move, the administration had been laying the groundwork for cutting off Iran from global energy markets without raising the price of gasoline or alienating close allies.
Apparently fearful of the expanded sanctions' possible impact on the already-stressed economy of Iran, the world's third-largest energy exporter, Rahimi said, "If they impose sanctions on Iran's oil exports, then even one drop of oil cannot flow from the Strait of Hormuz," according to Iran's official news agency.
Iran just began a 10-day naval exercise in the area.
Obama administration officials have recently said that the United States has a plan to keep the strait open in the event of a crisis. In Hawaii, where Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat. That seemed in keeping with an effortto lower the level of angry exchanges, partly to avoid giving Iran the satisfaction of a response and partly to avoid spooking financial markets.
But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response. Some administration officials believe that a plot to assassinate the Saudi ambassador to the United States -- which Washington alleges received financing from the Quds Force, part of the Iranian Revolutionary Guards Corps -- was in response to U.S. and other international sanctions.
Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the U.S. economy, and to warn U.S. trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.
Oil prices rose above $100 a barrel in trading after the threat, although it was unclear how much that came from investors' concern that a Persian Gulf confrontation could disrupt oil flows.
The new punitive measures, part of a bill financing the military, would significantly escalate U.S. sanctions against Iran. They come just a month and a half after the International Atomic Energy Agency published a report that for the first time laid out its evidence that Iran may be secretly working to design a nuclear warhead, despite the country's repeated denials.
In the wake of the IAEA report and a November attack on the British Embassy in Tehran, the European Union is also contemplating strict sanctions, such as an embargo on Iranian oil.