Iran plays with fire as report suggests Strait of Hormuz could well see closure

An Iranian newspaper today quotes a senior commander in Iran’s Revolutionary Guard as saying that Tehran’s leadership has decided to order the closure of the strategic Strait of Hormuz if the country’s oil exports are blocked (possibly referring to recent sanctions against the country).

Khorasan daily reported Sunday that Ali Ashraf Nouri says the strategic decision has been made by Iran’s top authorities.

Practising Strait of Hormuz Closure

Iran’s next round of Persian Gulf naval drills will practice the armed forces ability to close the Strait of Hormuz, a lawmaker on parliament’s national security committee was cited by Mehr News as saying.

Iran’s elite Revolutionary Guards Corp will start naval exercises on 27th January in the Gulf with the aim of enhancing the country’s ability to close the chokepoint into that body of water “in the shortest possible time when the situation requires it.” Mehr cited Esmaeil Kowsari, a member of parliament’s National Security and Foreign Policy Committee, as saying in a report published on Saturday.

Iran threatened last month to shut the Strait, a transit point for a fifth of oil traded worldwide, if sanctions are imposed on its crude oil exports.

Effect of Sanctions

The Obama administration will implement the new US sanctions gradually over the next six months, however, the American measures, combined with a pending EU ban on importing Iranian crude, will wreak havoc on Tehran’s energy exports, which generate the overwhelming majority of the regime’s foreign exchange.

Beyond Europe, major Iranian customers such as Japan and South Korea will co-ordinate carefully with Washington. China is already cutting back its purchases in a bid for considerable price discounts.

For the oil markets, the net effect of the latest sanctions against Iran and the tensions will bring intensified volatility and sustained higher crude oil prices.

UK Destroyer on Route

Meanwhile, the United Kingdom on Saturday revealed that it is planning to send warships to the Persian Gulf.

The UK Ministry of Defense described the deployment of the HMS Daring as “long-planned” and “entirely routine.” The destroyer will replace a frigate stationed in the area, it said.

India to Pay Iran for Crude Oil in Rupees

India has announced today new plans to pay for Iranian crude oil it imports in Indian rupees, opposed to US dollars.

A senior Indian government official, speaking on condition of anonymity, said the issue will be addressed when a multi disciplinary team visits Tehran on January 16 to discuss uninterrupted supply from the major oil producer, the Press Trust of India reported on Sunday.

Under the proposal, the National Iranian Oil Company (NIOC) will open an Indian rupee account with Indian banks, and can use the money to purchase non strategic commodities like railway imports. However, the NIOC cannot use the money to invest in India or buy shares in Indian companies.

India satisfies about three quarters of its crude oil demands through imports and Iran is its second largest supplier after Saudi Arabia.

World Chaos Within 24 Hours

Rear Adm. Ali Fadavi, of Iran’s Islamic Revolutionary Guard Corps, said last month the world could not last 24 hours without Persian Gulf oil, and that Iran is capable of closing the strait.

“Today, out of the 1,300 billion barrels of oil in the world, 800 billion barrels are in the Persian Gulf,” Fadavi commented.

The US Navy said the threat to block the strait is unacceptable, as the flow of goods and services is vital not only to the region but to the world.

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Iran plays with fire as report suggests Strait of Hormuz could well see closure