Threat to Hormuz shipping seen receding
Source: BI-ME with Bloomberg , Author: Posted by BI-ME staff
Posted: Tue January 10, 2012 12:22 pm

INTERNATIONAL. Iran is unlikely to shut down shipping through the Strait of Hormuz in response to Western sanctions targeting its oil exports, President Barack Obama’s former adviser on Iran said.

Oil prices fell yesterday as concern eased that Iran would attempt to impede shipping through the Strait, which accounts for about a fifth of the oil traded globally. The decline occurred even as tensions increased, with Iran announcing it has taken another step in its nuclear program and that it had sentenced to death a former U.S. soldier of Iranian descent accused of spying.

“Do I really think that they’re going to go ahead and try to shut down the Straits of Hormuz?” Dennis Ross, who served two years on the National Security Council as Obama’s special assistant on Iran, said yesterday in an interview at Bloomberg’s office in Washington. “I do not. They will be the ones who suffer the most from that.”

An Iranian newspaper January 8 cited a senior commander of the Revolutionary Guard Corps, Ali Ashraf Nouri, as saying Iran’s leadership has decided to prevent shipping through the Strait if Iran’s “enemies block the export of our oil,” according to the Associated Press.

The European Union is weighing whether to move up to January 23, from January 30, a meeting of foreign ministers to consider imposing an embargo on imports of Iranian oil, an EU diplomat said yesterday.

Separately, France condemned Iran’s production of enriched uranium at its facility near Qom and called for sanctions of an “unprecedented severity,” the French Ministry of Foreign and European Affairs said yesterday in an e-mailed statement.

Ross, who last month rejoined the Washington Institute for Near East Policy, a research group, said that “a lot of the bluster” reflects internal political jockeying in Iran. Iran would be unable to export its own oil if shipping were impeded, he said.

“I don’t think one can completely discount” the risk because the authorities may not control all the factions, he said. “But I think that they understand the risks that they run and, if you look at their historical behavior, for all their tough talk, they don’t go out of their way unnecessarily to provoke” a U.S military response that could threaten the regime.

The U.S. hasn’t seen any efforts by Iran to close the Strait to shipping, Pentagon spokesman George Little said yesterday.

“We don’t see any active steps being taken by the Iranians to close the Strait,” Little told reporters in Washington. “The rhetoric has gotten a little heavy in recent days and it’s time for it to go lighter.”

The probability of Iran closing the Strait of Hormuz is low, and Saudi Arabia will probably increase crude output to replace supplies from Iran, Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc. (GS), said in London yesterday.

Oil for February delivery fell 25 cents to US$101.31 a barrel on the New York Mercantile Exchange, the lowest settlement of 2012. Futures are up 15% in the past year.

The situation regarding Iran is bearish for the price of crude oil, Goldman’s Currie said. Europe will turn to Saudi Arabia to replace supplies from Iran, whose exports will go to China, where demand is strong, Currie said at a conference in London.

Iran has begun enriching uranium to as much as 20 percent U-235 at the underground Fordow underground site near the city of Qom, the International Atomic Energy Agency said in an announcement that drew immediate U.S. condemnation of Iran.

The site is monitored by IAEA inspectors to detect any attempt to enrich uranium to the 90% level necessary for a nuclear bomb.

“This is a further escalation of their ongoing violations with regard to their nuclear obligations,” State Department spokeswoman Victoria Nuland said yesterday of Iran.

Iran has said the 20% enriched uranium is intended for a research reactor that produces isotopes for medical use. Nuclear physicist David Albright, a former weapons inspector and president of the Institute for Science and International Security, a Washington research group, said Iran has already has enough such fuel to serve that purpose for several years.

Stockpiling 20 percent enriched uranium would make it that much easier to get to the next step of 60 percent, and from there to 90% enrichment that is ideal for creating weapons, Albright said.

U.K. Foreign Secretary William Hague, in an e-mailed statement yesterday, called the 20 percent enrichment “a provocative act which further undermines Iran’s claims that its programme is entirely civilian in nature.”

In Iran, a court found Amir Mirzaei Hekmati guilty of collaborating “with a hostile country and spying for the Central Intelligence Agency,” Iran’s state-controlled Fars news agency said yesterday.

The U.S. is working to confirm Hekmati’s death sentence, and allegations that he worked for the CIA are “simply untrue,” Nuland said in an e-mailed statement. “The Iranian regime has a history of falsely accusing people of being spies, of eliciting forced confessions and of holding innocent Americans for political reasons.”

Hekmati, who was born in Arizona in 1983, joined the U.S. military in 2001 after completing high school, the Associated Press said, citing his family. Behnaz Hekmati, his mother, said she and her husband Ali are “shocked and terrified” over the death sentence, writing to the AP in an e-mail. Ali Hekmati earlier told the AP his son was visiting his grandmothers in Iran when he was arrested.

Hekmati, represented by a court-appointed lawyer, has 20 days to appeal, according to the AP.

The U.K.’s Royal Navy said yesterday it’s deploying one of its most modern destroyers, HMS Daring, to the Persian Gulf in a “long planned” and “routine” replacement of another ship.

In Copenhagen, EU President Herman Van Rompuy told reporters that European sanctions, including discussions about a potential oil embargo, are “putting pressure” on Iran to negotiate a resolution of the nuclear issue.

Officials are checking whether all EU foreign ministers are able to attend a meeting on January 23 so that the session doesn’t conflict with a gathering of EU leaders set for January 30, said a diplomat, who declined be identified, citing government policy.

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