[In recent interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event of a crisis. In Hawaii , where President Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat to close the strait. That seemed in keeping with what administration officials say has been an effort to lower the level of angry exchanges, partly to avoid giving the Iranian government the satisfaction of a response and partly to avoid spooking financial markets.]
By David E. Sanger And Annie Lowrey
The
declaration by Iran’s first vice
president, Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation that, if
fully implemented, could substantially reduce Iran’s oil revenue in a bid to
deter it from pursuing a nuclear weapons program.
Prior to
the latest move, the administration had been laying the groundwork to attempt
to cut off Iran from global energy markets without raising the price of
gasoline or alienating some of Washington’s closest allies.
Apparently
fearful of the expanded sanctions’ possible impact on the already-stressed
economy of Iran, the world’s third-largest energy exporter, Mr. Rahimi said,
“If they impose sanctions on Iran’s oil exports, then even one drop of oil
cannot flow from the Strait of Hormuz,” according to Iran’s official news agency.
Iran just began a 10-day naval exercise in the area.
In recent
interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event
of a crisis. In Hawaii , where President Obama is vacationing, a White House
spokesman said there would be no comment on the Iranian threat to close the
strait. That seemed in keeping with what administration officials say has been
an effort to lower the level of angry exchanges, partly to avoid giving the Iranian
government the satisfaction of a response and partly to avoid spooking
financial markets.
But the
energy sanctions carry the risk of confrontation, as well as economic
disruption, given the unpredictability of the Iranian response. Some administration
officials believe that a plot to assassinate the Saudi ambassador to the United
States — which Washington alleges received funding from the Quds Force, part of
the Iranian Revolutionary Guards Corps — was in response to American and other
international sanctions.
Merely
uttering the threat appeared to be part of an Iranian effort to demonstrate its
ability to cause a spike in oil prices, thus slowing the United States economy,
and to warn American trading partners that joining the new sanctions, which the
Senate passed by a rare 100-0 vote, would come at a high cost.
Oil prices
rose above $100 a barrel in trading after the threat was issued, though it was
unclear how much that could be attributed to investors’ concern that
confrontation in the Persian Gulf could disrupt oil flows.
The new
punitive measures, part of a bill financing the military, would significantly
escalate American sanctions against Iran . They come just a month and a half after the International
Atomic Energy Agency published a report that for the first time laid out its
evidence that Iran may be secretly working to design a nuclear warhead,
despite the country’s repeated denials.
In the
wake of the I.A.E.A. report and a November attack on the British Embassy in Tehran , the European Union is also contemplating strict new
sanctions, such as an embargo on Iranian oil.
For five
years, the United
States has
implemented increasingly severe sanctions in an attempt to force Iran ’s leaders to reconsider the suspected nuclear weapons
program, and answer a growing list of questions from the I.A.E.A. But it has
deliberately stopped short of targeting oil exports, which finance as much as
half of Iran ’s budget.
Now, with
its hand forced by Congress, the administration is preparing to take that final
step, penalizing foreign corporations that do business with Iran ’s central bank, which collects payment for most of the
country’s energy exports.
The
sanction would effectively make it difficult for those who do business with Iran ’s central bank to also conduct financial transactions with
the United
States . The
step was so severe that one of President Obama’s top national security aides
said two months ago that it was “a last resort.” The administration raced to
put some loopholes in the final legislation so that it could reduce the impact
on close allies who have signed on to pressuring Iran .
The
legislation allows President Obama to waive sanctions if they cause the price
of oil to rise or threaten national security.
Still, the
new sanctions raise crucial economic, diplomatic, and security questions. Mr.
Obama, his aides acknowledge, has no interest in seeing energy prices rise
significantly at a moment of national economic weakness or as he intensifies
his bid for re-election — a vulnerability the Iranians fully understand. So the
administration has to defy, or at least carefully calibrate, the laws of supply
and demand, bringing to market new sources of oil to ensure that global prices
do not rise sharply.
“I don’t
think anybody thinks we can contravene the laws of supply and demand any more
than we can contravene the laws of gravity,” said David S. Cohen, who, as
treasury under secretary for terrorism and financial intelligence, oversees the
administration of the sanctions. But, he said, “We have flexibility here, and I
think we have a pretty good opportunity to dial this in just the right way that
it does end up putting significant pressure on Iran .”
The
American effort, as described by Mr. Cohen and others, is more subtle than
simply cutting off Iran ’s ability to export oil, a step that would immediately
send the price of gasoline, heating fuel, and other petroleum products skyward.
That would “mean that Iran would, in fact, have more money to fuel its nuclear
ambitions, not less,” Wendy R. Sherman, the newly installed under secretary of
state for political affairs, warned the Senate Foreign Relations Committee
earlier this month.
Instead,
the administration’s aim is to reduce Iran ’s oil revenue by diminishing the volume of sales and
forcing Iran to give its customers a discount on the price of crude.
Some
economists question whether reducing Iran ’s oil exports without moving the price of oil is feasible,
even if the market is given signals about alternative supplies. Already,
analysts at investment banks are warning of the possibility of rising gasoline
prices in 2012, due to the new sanctions by the United States as well as complementary sanctions under consideration by
the European Union.
Since
President Obama’s first months in office, his aides have been talking to Saudi
Arabia and other oil suppliers about increasing their production, and about
guaranteeing sales to countries like China, which is among Iran’s biggest
customers. But it is unclear that the Saudis can fill in the gap left by Iran , even with the help of Libyan oil that is coming back on
the market. The United
States is
also looking to countries like Iraq and Angola to increase production.
Daniel
Yergin, whose new book, “The Quest,” describes the
oil politics of dealing with states like Iran , noted in an interview that “given the relative tightness
of the market, it will require careful construction of the sanctions combined
with vigorous efforts to bring alternative supplies into the market.” He said
that it would “add a whole new dimension to the debate over the Keystone XL pipeline,” the oil pipeline from Canada to the United States that the administration has sought to delay.
“The only
strategy that is going to work here is one where you get the cooperation of oil
buyers,” said Michael Singh, managing director of the Washington Institute for
Near East Policy. “You could imagine the Europeans, the Japanese, and the South
Koreans cooperating, and then China would suck up all of the oil that was initially going to
everyone else.”
A broader
question is whether the sanctions — even if successful at lowering Iran ’s oil revenue — would force the government to give up its
nuclear ambitions.
One
measure of the effects, however, is that the Iranian leadership is clearly
concerned. Already the Iranian currency is plummeting in value against the
dollar, and there are rumors of bank runs.
“Iran ’s economic problems seem to be mounting and the whole
economy is in a state of suspended expectation,” said Abbas Milani, director of
Iranian studies at Stanford University . “The regime keeps repeating that they’re not going to be
impacted by the sanctions. That they have more money than they know what to do
with. The lady doth protest too much.”