TEHRAN/LONDON, (Reuters) – Iran announced yesterday new military exercises in the Strait of Hormuz, but the West has readied plans to use strategic oil stocks to replace almost all Gulf oil lost if Iran blocks the waterway, industry sources and diplomats told Reuters.
They said senior executives of the International Energy Agency (IEA) discussed on Thursday an existing plan to release up to 14 million barrels per day (bpd) of government-owned oil stored in the United States, Europe, Japan and other importers.
This rate of release could be kept up for a month, offsetting most of the 16 million barrels a day of crude passing through the world’s most important shipping lane that could be halted by an Iranian blockade.
Iranian officials have threatened in recent weeks to block the strait if new sanctions imposed by the United States and planned by the European Union, with the aim of discouraging Iran’s nuclear programme, harm Tehran’s oil exports.
Earlier this week Iran said it would take action if the United States sailed an aircraft carrier through the strait, and followed this by announcing new military exercises, shortly after completing 10 days of naval drills in neighbouring seas.
Real Admiral Ali Fadavi, naval commander of the Revolutionary Guards Corps, said the exercises next month would focus directly on the Strait of Hormuz, which leads out of the Gulf and provides the outlet for most oil from the Middle East.
“Today the Islamic Republic of Iran has full domination over the region and controls all movements within it,” Fadavi said in remarks reported by the Fars news agency.
The United States, whose Fifth Fleet based in the area is far more powerful than Iran’s naval forces, says it will ensure the international waters of the strait stay open. Britain said on Thursday that any attempt to close it would be illegal and unsuccessful.
In a brief respite from the rising tension between the two foes, the U.S. navy rescued 13 Iranians held hostage for weeks by pirates who had apparently used their fishing vessel as a “mother ship” for their operations, the Pentagon said yesterday.
The Iranians were freed by the very carrier group that Iran has said should not return to the Gulf.
The captain of the Al Molai expressed his “sincere gratitude” for their rescue by ships of the USS John C. Stennis carrier strike group, and the Iranians were returning home, a U.S. Navy officer with the strike group said.
New financial sanctions signed into law by U.S. President Barack Obama on New Year’s Eve are aimed at making it difficult for most countries to buy Iranian oil. The European Union is expected to announce its own tough measures at end-January.
Most traders believe Iran will still be able to find buyers, at least for now, for its exports of 2.6 million barrels of oil per day (bpd). But it may have to offer steep discounts that reduce the revenue it needs to feed its 74 million people.
The sanctions are already hurting ordinary Iranians, faced with rising prices and a falling rial currency. They have been queuing at banks to convert their savings into dollars.
Iran holds parliamentary elections in two months, the first since a 2009 presidential election that led to nationwide mass street protests, put down by force. However, the Arab Spring has shown the vulnerability of authoritarian governments in the region to protests fuelled by anger over economic hardship.
NUCLEAR PROGRAMME
Diplomatic sources in Vienna said Iran had come closer in recent weeks to starting uranium enrichment deep inside a mountain at a protected site near the holy city of Qom.
Starting production at the Fordow site could make it harder to revive nuclear talks that collapsed a year ago, worsening Iran’s confrontation with the West.
Iran is already refining uranium to a fissile purity of 20 percent – far more than the 3.5 percent level usually required to power nuclear energy plants – above ground at another site.
