January 6, 2012
Rear Admiral Ali Fadavi, naval commander of the Revolutionary Guards Corps, said on Friday that Iran will conduct new military exercises in the Straight of Hormuz.
Fadavi told Press TV the new exercise, dubbed the Great Prophet, will be different than the previous Velayat 90 drill initiated on December 24. Further details were not provided.
Both the United States and the European Union are determined to stop Iranian oil shipments and shut down the country’s economy. The EU plans to unveil its effort at the end of the month. On New Year’s Eve, Obama signed the NDAA bill into law. The bill contains provisions imposing sanctions on foreign companies that do business with the Central Bank of Iran.
The price of oil reached $113 a barrel today on market concern of a supply disruption due to the growing tensions between the West and Iran. Brent crude rose 32 cents to $113.06 a barrel after declining by 96 cents on Thursday. U.S. crude was up 51 cents to $102.32, according to Reuters.
Analysts warn that the sanctions will worsen the eurozone economic crisis now playing out.
“Let’s assume the European Union is stupid enough to go along with the US in imposing sanctions on Iran. That would only mean 250,000 barrels of heavy sour oil not coming into the EU,” Paul Stevens, economist and emeritus professor at Dundee University in Scotland, told CNBC.
“But the impact that would have on countries like Italy and Greece would be enormous, and the Greeks are not going to slit their own throats for the sake of an EU sanction when Iran is the only country willing to offer them oil on favorable terms. It would utterly destroy the Greek economy.”
Stevens warned that if the Greek economy completely collapses it will take its European neighbors down with it.
China, the largest buyer of Iranian oil, has rejected the sanctions. “Sanctioning is not the correct approach to easing tensions,” said, Hong Lei, a ministry spokesman. “China opposes the placing of one’s domestic law above international law and imposing unilateral sanctions on other countries.”
Japan and South Korea are currently working to find a compromise that will allow Iranian oil to continue flowing. “We are considering our response and are closely discussing the matter with the U.S.,” explained Kazuhiro Kawase, a Japanese Foreign Ministry official. South Korea is attempting to minimize “the negative impacts” of sanctions as well.
On Thursday, Britain said it would use military force if need be to keep the Strait of Hormuz open.
“Alongside the US 5th Fleet in the Gulf, we have naval assets, we have mine counter-measures capability, we have a frigate present there, and we are an integrated part of the allied naval task force in the Gulf and one of the missions of that task force is to ensure that those shipping lanes remain open,” British Defense Secretary Philip Hammond announced.
Britain’s Royal Navy participates in the Combined Maritime Forces, a US-led, Bahrain-based naval flotilla drawn from 25 nations.