US warns Iran over oil-block threat

The US has warned Iran it will not tolerate any disruption of traffic through the Strait of Hormuz after Iran threatened to choke off the vital Persian Gulf oil transport route if Washington imposes sanctions targeting its crude exports.

The increasingly heated exchange raises new tensions in a stand-off that has the potential to spark military reprisals and send oil prices soaring.

Iran’s navy chief boasted today that it would be “very easy” for his country’s forces to close the strategic Strait of Hormuz, the passage at the mouth of the Persian Gulf through which a sixth of the world’s oil passes daily.

It was the second such threat in two days.

“Iran has comprehensive control over the strategic waterway,” Admiral Habibollah Sayyari told state-run Press TV, as the country was in the midst of a 10-day military drill near the strategic waterway.

The comments drew a quick response from the US.

“This is not just an important issue for security and stability in the region, but is an economic lifeline for countries in the Gulf, to include Iran,” Pentagon press secretary George Little said. “Interference with the transit or passage of vessels through the Strait of Hormuz will not be tolerated.”

Separately, a Bahrain-based US Navy 5th Fleet spokeswoman said the Navy is “always ready to counter malevolent actions to ensure freedom of navigation”.

Iran’s threat to seal off the Gulf, surrounded by oil-rich Gulf states, underlines the depth of worry over the prospect that the Obama administration will go ahead with sanctions over its nuclear programme that would severely hit its biggest revenue earner, oil.

The sanctions themselves have raised worries that removing Iran’s crude from the market will lead to a spike in oil prices.

Gulf Arab nations appeared ready to at least ease market tensions. A senior Saudi Arabian oil official told the AP that Gulf Arab nations are ready to step in to offset any potential loss of exports from Iran, which is the world’s fourth largest oil producer.

What remains unclear is what routes the Gulf nations could take to bring that production to market if Iran goes through with its threats.

About 15 million barrels per day pass through the Hormuz Strait, according to the US Energy Information Administration.

There are some pipelines that could be tapped, but Gulf oil leaders, who met in Cairo on December 24, declined to say whether they had discussed alternate routes or what they may be.

The Saudi comment, however, appeared to allay some concerns. The US benchmark crude futures contract fell 77 cents in early morning trade on the New York Mercantile Exchange, but still hovered above $100 per barrel.

US State Department spokesman Mark Toner played down the Iranian threats as “rhetoric,” saying: “We’ve seen these kinds of comments before.”

While many analysts believe that Iran’s warnings are little more than posturing, they still highlight the delicate nature of the oil market, which moves as much on rhetoric as supply and demand fundamentals.

So far, Western nations have been unable to agree on sanctions targeting oil exports, even as they argue that Iran is trying to develop a nuclear weapon.

Tehran maintains its nuclear programme – already the subject of several rounds of sanctions – is purely peaceful.

The US Congress has passed a bill banning dealings with the Iran Central Bank, a move that would damage Iran’s ability to export crude.