Long Crisis | Are You Prepared for the New Normal?

As new sanctions hit their economy Iran threatened Tuesday to take action if the U.S. Navy moves an aircraft carrier into the Gulf. This is Tehran’s most aggressive statement yet after weeks of saber-rattling as new U.S. and EU financial sanctions take an increasing toll on its economy.

New Financial Sanctions Will Cripple Iranian Economy

The new sanctions by the US and EU are designed to cut off from the American financial system any bank or central bank which conducts business with Iran’s central bank. As Iran uses it central bank to collect payment for Iranian oil shipments the implementation of the sanctions would drastically effect Iran’s ability to sell and be paid for oil that it sells on world markets.

If the sanctions are actually carried out against Iran they would drastically affect Iran’s cash flow. Just the threat of the sanctions being used has already caused Iran severe problems at home. There are reports that huge lines have formed at banks as Iranian savers atempt to purchase dollars and withdraw their money from Iranian banks to purchase gold and silver or other commodities and goods that they think will protect them from the collapse of the Rial currency.

Economic Conditions Within Iran Now Rapidly Deteriorating

The Rial has already fallen in value by 40% against the dollar over the past few weeks. Prices of just about everything, especially food and other necessities, have soared as Iranians try to convert their depreciating currency into staple goods before the next round of price increases occur. It appears that Iran is in the early stages of a hyperinflation event.

Army chief Ataollah Salehi said the United States had moved an aircraft carrier out of the Persian Gulf because of Iran’s naval war game exercises. He said Iran would take action if the ship returned.

“Iran will not repeat its warning … the enemy’s carrier has been moved to the Sea of Oman because of our drill. I recommend and emphasize to the American carrier not to return to the Persian Gulf,” army chief Salehi said.

“I advise, recommend and warn them over the return of this carrier to the Persian Gulf because we are not in the habit of warning more than once.”

Military experts still say they do not expect Tehran to aggressively commit an act of war – the U.S. Navy has far superior firepower than Iran’s sea forces – but Iran is running out of diplomatic maneuvering room to avert a confrontation.

“I think we should be very worried because the diplomacy that should accompany this rise in tension seems to be lacking on both sides,” said Richard Dalton, former British ambassador to Iran and now an associate fellow at Chatham House think tank.

“I don’t believe either side wants a war to start. I think the Iranians will be aware that if they block the Strait or attack a U.S. ship, they will be the losers. Nor do I think that the U.S. wants to use its military might other than as a means of pressure. However, in a state of heightened emotion on both sides, we are in a dangerous situation.”

The real danger is that a shooting war could easily get underway through a miscalculation or mistake on either side. For example, the United States Navy may decide to show Iran who’s really the boss of the sea lanes in the region by moving an aircraft carrier battle group back into the Persian Gulf.

The Iranians, under severe stress and backed into a corner by the new financial sanctions, may decide to show the U.S. Navy that it does have some muscle behind its threats by firing missiles at the aircraft carrier battle group. Any Iranian action against the U.S. Navy would quickly escalate into what could be a very nasty war, one that could spread throughout the region.

Increased tensions in the region have already affected the price of crude oil. Brent crude futures were up more than four dollars Tuesday afternoon in London, pushing above $111 a barrel on the news of potential threats to supply in the Gulf and the potential closing by Iran of the Strait of Hormuz.

Should war between Iran and the US occur the price of oil could easily double from current levels. This would be a tremendous blow to the world economy.

LongCrisis Recommends

Iran to Sell Crude Oil for GOLD (Tulsa Liberty)
Charles Krauthammer On The Iran Sanctions (LogisticsMonster)

Sphere: Related Content

{ 0 comments }

The war of words is on. Iran’s navy chief publicly states that closing the Strait of Hormuz to oil tanker traffic would be “easier than drinking a glass of water.” U.S. analysts disagree saying it would be a big challenge for Iran.

US Analysts Doubt Iran’s Ability to Close the Strait and Keep it Closed

US analysts say Iran’s navy does not have the size for a sustained physical blockade of the Strait. They do concede that Iran has mine-laying and missile capability to wreak some havoc. “It wouldn’t be a cakewalk” for Iran, said Caitlin Talmadge, a George Washington University professor who is knowledgeable about the Strait of Hormuz. However he adds, “If Tehran really wanted to cause trouble, it could.”

The Fifth Fleet, based in nearby Bahrain, said on Wednesday that “any disruption will not be tolerated.” That came after Iran’s navy chief said closing the Strait of Hormuz “is really easy… or as Iranians say, it will be easier than drinking a glass of water.”

Iranian saber-rattling about closing the Strait of Hormuz to oil shipping is not new. Keeping a certain amount of tension alive over the possibility of closing the Strait works in Iran’s favor as it supports crude oil prices and increases Iran’s revenue from oil sales. So far Iran has made no actual attempt to close the waterway, which is only 21 miles wide at its narrowest point.

Iran’s Leaders Feel Threatened by New Oil Related Sanctions

However, this time the context of Iran’s threat is new. The oil exporter acts as if it is feeling even more threatened by the West over possible oil-related sanctions.

“We’re in the game of threats. If you’re going to cut them out of the oil market, they have no interest in the flow of oil from the region,” Vali Nasr, a Tufts University professor, said.

Iran’s message is: “If we are not allowed to play in the game, we have no interest in allowing anybody else to play,” said Nasr, a former State Department adviser.

The Danger of a Miscalculation Leading to War with Iraq is High

The danger of the word game being played is that it ratchets tensions up and any actual small incident that occurs in the Strait of Hormuz could quickly spin out of control. It also gives Neo-cons, who are still plentiful at the highest levels of the US government, the opportunity for a false flag incident along the lines of the Gulf of Tonkin episode which led to the escalation of the Vietnam War.

US analysts are probably right that the US Fifth Fleet could quickly take action to neutralize Iranian efforts to close the Strait. The fire power of the potent U.S. Navy, supported by Navy and Marine attack aircraft, would likely be able to clear the Strait of Iranian warships and patrol craft without great difficulty.

The analysts may not be considering what other actions an Iran under attack by US forces may rapidly take. US forces in Afghanistan, remaining contractors and embassy staff in Iraq, and US forces throughout the Middle East could find themselves under missile and direct attacks. These attacks would almost certainly include the U.S. Navy’s Fifth Fleet headquarters at Bahrain.

A wounded and backed into a corner Iran would likely attack the Saudi Arabian oil fields, refineries, pipelines, and ocean shipping facilities. There is no love lost between Shiite dominated Iran and Sunni dominated Saudi Arabia. Of course, Iraq leaders know that crippling the flow of oil shipments to the US from Saudi Arabia would almost immediately cripple the US and Western economies. In addition, such an attack would immediately double or triple the price of oil which would greatly add to Iran’s oil revenues for any oil it managed to sell on world markets.

The real danger of escalating tensions over the Strait of Hormuz is that a small miscalculation by either side, by the Iranians or the US, could lead to events that quickly spin out of control and lead to disastrous consequences. Increasing sanctions against Iran that would include its ability to export oil is a dangerous tactic that could push Iraq to actually carry out its threat to close the Strait of Hormuz.

Closing the Strait would bring an immediate response from the US Fifth Fleet. With tensions between the US and Iran at an all-time high a disastrous to the world economy war with Iran could begin with a miscalculation by even low-level military personnel from either side.