Iranian Navy Conducts Exercises, Oil Prices Surge

The Iranian navy plans to spend the next week conducting exercises in the Straits of Hormuz, which it occasionally threatens to blockade.  A good one-sixth of the world’s oil passes through the Straits, so this kind of talk makes the international markets nervous.

According to CNN, oil prices jumped 2% today as the “Velayat 90” operation got under way, pushing oil over $100 per barrel.  Iran’s First Vice President, Mohammad Reza Rahimi, didn’t help anyone relax by declaring, “If Iran oil is banned, not a single drop of oil will pass through Hormuz Strait.”

An Al-Jazeera report describes the scope of the Iranian naval operation:

The war games cover a 2,000km stretch of sea off the Strait of Hormuz, northern parts of the Indian Ocean and into the Gulf of Aden, near the entrance to the Red Sea, state television reported.

The drill will be Iran’s latest show of strength in the face of mounting international criticism over its controversial nuclear programme, which the West fears is aimed at developing atomic weapons. Tehran denies those charges, insisting the program is for peaceful purposes only.

Adm Habibollah Sayyari, the navy chief, said Iran is holding the drill to show off its prowess and defense capabilities.

“To show off its might, the navy needs to be present in international waters. It’s necessary to demonstrate the navy’s defense capabilities,” state TV quoted Sayyari as saying.

Sayyari said submarines, surface-to-sea missile systems, missile-launching vessels, torpedoes and drones will be employed in the maneuvers.

It wouldn’t take much “might” to seal the Straits of Hormuz, which are only four miles wide.  Many analysts believe Iran would not be willing to risk economic suicide with a blockade, but they’ve muttering about the need to teach their “enemies” a “firm and strong lesson.”  As Reuters observes, the European Union has a meeting coming up in January at which an embargo of Iranian oil might be discussed.  The Iranians claim to have private assurances from Saudi Arabia that their oil would not be replaced in the event of an embargo, making it painful for the West to continue such an action, but others doubt the Saudis have made any such promises.

The U.S. Maritime Administration notes that Iran has conducted boardings and inspections of foreign vessels during previous naval exercises, and issued the following advisory:

The possibility exists that Iran will attempt to conduct boarding and inspection during exercises between December 2011 and March 2012. The most likely location for this activity would be in the vicinity of the Strait of Hormuz, particularly in areas closer to Iranian territorial waters.

If a US-flag vessel is hailed for boarding by the Iranian Navy in international waters the ship’s master should “protest but comply,” if circumstances warrant.  US-flag vessels are advised to report incidents to the Comusnavcent Battlewatch Captain (Maritime Operations Center) at 011-973-1785-3879, and Marlo Bahrain at 011-973-3940-1395.