Thursday, January 26, 2006

Iran Threatens To Shut Straits Of Hormuz, Right-Wing NewsMax Says

A right-wing Website called NewsMax is reporting this afternoon on what isays was an original report on Tuesday from Haaretz, a right-wing Israeli newspaper, that says the nation will shut down the strategic Straits of Hormuz if European nations persist in their threats to impose sanctions over Iran's alleged development of nuclear fuel and weaponry. No Haaretz story could be located, however.

This north-looking view shows the Straits of Hormuz (25.5N, 56.0E) which connects the Persian Gulf, left, with the Gulf of Oman, right. The mainland of Iran is at the top, north, and the Musandam peninsula lies to the south. Click on the photo for a larger image.


The threat to shut down the Strait of Hormuz would imperil a quarter of the world's oil supply, and Iran is globally acknowledged as the country that is owner of the straits.

It is unclear whether the NewsMax citation is credible. The alleged Haaretz story was inaccessible Thursday evening, even though its Tuesday Website can be accessed fron a link on the front page. The Tuesday site has no articles on the Straits of Hormuz, although several on Iran.

The news, if further confirmed, is likely to send oil prices higher. In addition, a report on National Public Radio this morning mentioned the possibility that Iran could close down the strategic waterway. That story appears after the piece from NewsMax that was allegedly based on a Haaretz story:

Here is the NewsMax story:

Thursday, Jan. 26, 2006 9:24 a.m. EST
Iran: We'll Shut Down Straits of Hormuz

A senior Iranian official is threatening to close the Straits of Hormuz using military force, which would effectively shut down the Persian Gulf oil supply - if European supports economic sanctions against Iran in a bid to halt Tehran's nuclear program.

"If Europe does not act wisely with the Iranian nuclear portfolio and it is referred to the U.N. Security Council and economic or air travel restrictions are imposed unjustly, we have the power to halt oil supply to the last drop from the shores of the Persian Gulf via the Straits of Hormuz," said Mohammed-Nabi Rudaki, deputy chairman of the Iranian parliament's National Security and Foreign Policy Commission.

According to the Israeli News service Haaretz, which first reported the threat on Tuesday based on an Iranian news account - this is the first time an Iranian official has publicly issued a military threat.

Twenty-five percent of the world's oil production passes through the Straits of Hormuz, which connects the Persian Gulf to the Indian Ocean. If Iran were to carry out such a threat, other big oil producers in the region, such as the United Arab Emirates and Kuwait, would be unable to export oil.

Raduki also warned that his country might resign its membership in the International Atomic Energy Agency and withdraw from the Nuclear Non-Proliferation Treaty.

Here is the report from Eric Weiner of National Public Radio that was aired this morning across the United States:

Iran's Other Potential WMD: Crude Oil
by Eric Weiner

“We've already seen that Iran is willing to talk about using oil as a weapon, and I think the markets are taking that threat seriously.”
Ian Bremmer, president of the Eurasia Group consulting firm

Day to Day, January 26, 2006 · For the past few weeks, Iran has tweaked the noses of world powers -- especially the United States -- as it continues its pursuit of nuclear power. Iran insists its nuclear program is strictly for peaceful purposes. The U.S. and its European allies worry that Iran plans on developing nuclear weapons.

It's not only nuclear weapons, however, that the world is worried about. Iran has another weapon at its disposal: oil. Iran's "oil weapon" may not be as worrisome as a nuclear weapon, but experts say it poses a very real and immediate threat to the world economy.

Iran is the world's fourth-largest oil producer. Every day, it exports more than two million barrels of crude -- twice as much as Iraq. Any move by Iran to cut off or curtail its oil exports would quickly translate into higher oil prices worldwide.

"Oil markets are already reacting," says Ian Bremmer, president of the Eurasia Group consulting firm. "We've already seen that Iran is willing to talk about using oil as a weapon, and I think the markets are taking that threat seriously."

Analysts say that should Iran act on its threat to unleash its "oil weapon," oil prices could skyrocket to $100 a barrel, or about $4 a gallon at the pumps. While that is clearly not an appealing prospect, neither is the prospect of a nuclear-armed Iran, say U.S. officials and lawmakers. On the on CBS political talk show Face the Nation, Sen. John McCain (R-AZ) put it plainly: "If the price of oil has to go up, then it's a consequence we would have to suffer."

The question, analysts say, is whether such a price hike would be short-lived or long term. The current state of the global oil market gives Iran a stronger hand. These days, countries like China and India are thirsty for oil, and there isn't a lot of surplus oil sloshing around on the global market.

In the past, the United States could rely on North Sea oil, for instance, to make up for shortfalls. Today, it must turn to nations like Venezuela and Nigeria. The recent hurricanes in the Gulf of Mexico have also hurt oil production. "Most of these supply situations are fraught with some kind of peril," says Frank Verrastro, head of the energy program at the Center for Strategic and International Studies.

But would Iran really follow through on its threat to unleash its "oil weapon?" After all, the government of Iran derives half of its revenue, and 80 percent of its hard currency, from oil sales. By cutting off those sales, wouldn't Iran be committing economic suicide?

Most experts say a complete cutoff of Iranian oil is unlikely -- but "there are a lot of things that the Iranians can do short of cutting off oil which are going to impact gas prices in the United States," says Ian Bremmer of the Eurasia Group. For instance, he says, Iran could threaten the movement of oil tankers in the Straits of Hormuz, a vital waterway that it controls.

"The Iranians can ramp this up or back as they're pressed," says Bremmer. "And thus far, they have shown every inclination to do precisely that."

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