Written by By threatening to block the Strait of Hormuz, Iran is nipping the West where it hurts the most
With the Iranians toying (pun intended) with the US over their espionage thingamabob which had popped inside Iranian airspace, the mercury is rising within Iran’s perpetual altercation with the West. Parviz Sarvari, a member of the Iranian parliament’s National Security Committee articulated that Iran was bracing itself for the closure of the Strait of Hormuz, as a part of a routine military exercise. Not only would this be Iran’s proverbial middle finger to dear Uncle Sam and his chums; as far as the oil game is concerned this would resoundingly throw the cat amongst the pigeons.
Strait of Hormuz is the strategic locus of global oil shipment with around 30 per cent of the world’s sea borne oil shipments traversing the four-mile lane between Iran and Oman. There is a daily flow of 15 million barrels of oil; 90 per cent Persian Gulf Exports and 40 percent of the global consumption. Mr Sarvari expounded his stratagem with regards to the military manoeuvre and the closing of the Strait, saying that “If the world wants to make the region insecure, we will make the world insecure.” Now this is something that would have the West scared stiff! For, not only is the military manoeuvre pretty daunting on its own, halting nearly a third of the world’s oil shipment would be a dagger in the hearts – and the wallets – of the Who’s Who of the oil gaming zone.
The geopolitcal apprehensions are one of the paramount influences over commodity prices. And considering the fix that Europe finds itself in, and also the budget deficit in US and UK, the historically volatile Middle East is on its way towards metamorphosing into a minefield. And indeed the sheer havoc that the news about the strait being blocked in the near future – in fact a news agency mistakenly reported that the decision of blockading strait had already been taken – caused can be depicted via the slapdash price action. West Texas Intermediate crude prices broke the $100 mark as they escalated to $101.25 per barrel – a 3.5 per cent ascent. Brent crude climbed 3.6 per cent to $111.10, and there was retraction with WTI ending at $99.64.
The Strait of Hormuz has a special place in Washington’s drawing board and while the fiscal repercussions are obvious, the US desire of securing freedom of seas would compel their navy to flaunt an aggressive riposte, as the water of Hormuz reaches boiling point. However, experts opine that Iran’s threats are more deterrence driven than out-an-out provocation for a naval conflict. Analysts are labeling it as a “covert intelligence war” on Iran’s part and the country is using oil as a political tool to keep all its bases covered with regards to any possibility of conflict over its nuclear programme – the biggest bone of contention between the West and Iran; and not your Average Joe bone, it’s the femur as far the current global dynamics are concerned.
Also engulfed in this little game of ours is of course Israel – one of the biggest stakeholders in the aforementioned femur. Iran has regularly warned that any attempts to up the ante in and around their country would result in a nuclear blitzkrieg over Israel. When the menace of nuclear arsenal is coupled with the lust of oil control, you get a TNT hankering after an excuse to explode. While the geopolitics might be controlling the fate of the market, the possible implications run the entire gamut from prolonged deterrence to sheer commotion! By targeting oil and in turn the global crude market, Iran is stamping on the West’s collective nerve. They might have it numb at the moment, but a backlash is inevitable.
This article was first published in Profit, Pakistan Today on 15th December 2011.
Kunwar Khuldune