By Shawn McCarthy, Globe and Mail, January 3, 2012
The United States has got a tiger by the tail as it ratchets up the pressure on Iran over its nuclear program while attempting to avoid an oil-price shock that would seriously damage the fragile global economy.
Iran has responded to the U.S. move to tighten sanctions by threatening to close the strategically crucial Strait of Hormuz, a key gateway from the Persian Gulf through which much of the world’s oil trade passes.
The rising political tensions roiled the global crude markets on Tuesday, as the benchmark North American oil price jumped more than $4 (U.S.) a barrel crude to $102.96. Traders are betting that prices would spike dramatically – perhaps as high as $150 (U.S.) a barrel – if the standoff escalates into an actual military conflict.
Higher crude costs would reduce household spending on others goods and services; drive up other prices, especially food, and batter the confidence of long-suffering consumers.
U.S. President Barack Obama signed into law on New Year’s Eve a series of new sanctions that would prohibit any foreign bank or institution that continues to do transactions with the Iranian central bank from having access to the U.S. financial system. The sanctions – which Mr. Obama can apply selectively – hit directly at Iran’s weakened financial state and its ability to sell oil on the international market.
The European Union is scheduled to debate tougher sanctions later this month, including similar financial measures to those taken by the United States, and an embargo on importing Iranian oil.
In response, Iranian military officials have warned that the country will close the Straits of Hormuz, and have backed up that threat with a series of missile tests and naval manoeuvres that ended Tuesday....
The Strait of Hormuz – a mere 34 kilometres wide at its narrowest spot – is the world’s most critical choke point for crude-oil trade.
Every day, some 17 million barrels of crude is expected through the waterway from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and Iran itself. That represents 35 per cent of the world’s seaborne crude export, and almost 20 per cent of total oil traded.
It’s likely not in Iran’s interest to close the Persian Gulf to oil exports since it would be hurting customers such as China and India and depriving itself of export revenues, said Bhushan Bahree, Washington-based Middle East expert with IHS CERA consultancy.
“But they can certainly make everybody think this is a dangerous situation,” Mr. Bahree said. “They could harass shipping; make it more expensive to insure; discourage ship owners from sending ships in and continuously keep the level of tension up.”
Somewhat ironic that, while scaring the world with its nuclear weapons program, Iran could effectively drive the world economy, especially those countries in the EU dependent on light crude, over the brink, without firing a single nuclear warhead.
In leadership and administrative terms, considerable time has to be spent with the most intransigent employees, unless and until their dismissal becomes inevitable and is completed.
In diplomatic terms, rogue states like Iran, North Korea, formerly Libya seem to be able, like the black sheep of any family, to attract more attention, to cause more distress and to bring about more disequilibrium, for their own narcissistic needs.
Driving the price of oil up, pushing the U.S. to the brink in the Strait of Hormuz, although the Pentagon is attempting to "cool" the conflict, playing cat-and-mouse with the IAEA and failing to disclose the true nature of its nuclear program...these moves seem fully calculated to put Iran in the forefront of the Middle East at a time when instability, fallen dictators, economic uncertainty, and quite literally chaos reigns throughout the region is another natural phenomenon....Nature abhors a vaccuum and Iran is doing everything possible to wrest control of the vaccuum it sees throughout the region, while the rest of the world watches and attempts to "shape" the future with the use of the limited levers at its disposal.
Syria is dependent on Iran for much of its military materiel; Hezbollah is a surrogate of Iran; Hamas undoubtedly has ties to Iran. And that merely scratches the surface of an extremely complicated vortex of relationships most of which spell danger for many of the traditionally accepted modes of conduct in world geopolitics.
The west can neither ignore nor inflame Iran; the west neither has control of the situation nor can it abdicate the scene. Russia and China are even more complicating, given their willingness to obstruct U.S.- led attempts to squeeze Iran into capitulation on it nuclear program.
The devil is always in the details, and this relatively small country is like a mosquito infested with insecticide scratching itself to death, while holding the world hostage to its fifteen years in the world spotlight...if it can be contained to that degree.
On the patio, on a hot summer night, most of us would slap it into oblivion; on the landscape of world economics and politics and in the current of Islamist uprisings, that is neither feasible nor ultimately desireable.
Somehow, diplomatic relations, of however secret a nature, have to be established between the U.S. and Iran, so that this centrifuge does not spin out of control, leaving us all wondering why we did not do more to prevent the disaster, while we may be in the middle of it.
Any successful denoument to this potential tragedy cannot and will not be negotiated on the front pages of our daily newspapers, but in the coffee shops of some third country, between envoys of both the power structure in Iran and the U.S. administration. And we are all watching and waiting, somewhat precariously sitting on our chairs in some anxiety, just like the markets.