Iran Threatens U.S. Navy As Sanctions Hit Economy

By Parisa Hafezi
Yahoo News

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

The prospect of sanctions targeting the oil sector in a serious way for the first time has hit Iran’s rial currency, which reached a record low on Tuesday and has fallen by 40 percent against the dollar in the past month.

Queues formed at Tehran banks and some currency exchange offices shut their doors as Iranians scrambled to buy dollars to protect their savings. On world markets, oil prices soared. Army chief Ataollah Salehi said the United States had moved an aircraft carrier out of the Gulf because of Iran’s naval exercises, and 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,” he 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.”

The U.S. military brushed off the threat: “The deployment of U.S. military assets in the Persian Gulf region will continue as it has for decades,” said spokesman Commander Bill Speaks.

“The U.S. Navy operates under international maritime conventions to maintain a constant state of high vigilance in order to ensure the continued, safe flow of maritime traffic in waterways critical to global commerce.”

The aircraft carrier USS John C Stennis leads a U.S. Navy task force in the region. It is now outside the Gulf in the Arabian Sea, providing air support for the war in Afghanistan, said Lieutenant Rebecca Rebarich, spokeswoman for the 5th Fleet.

The carrier left the Gulf on December 27 on a planned routine transit through the Strait of Hormuz, she said. Forty percent of the world’s traded oil flows through that narrow straight — which Iran threatened last month to shut if sanctions halted its oil exports.

Brent crude futures were up more than $4 in late Tuesday afternoon trade in London, pushing above $111 a barrel.

Tehran’s latest threat comes at a time when sanctions are having an impact on its economy, and the country faces political uncertainty with an election in March, its first since a 2009 vote that triggered countrywide demonstrations.

The West has imposed the increasingly tight sanctions over Iran’s nuclear program, which Tehran says is strictly peaceful but Western countries believe aims to build an atomic bomb. After years of measures that had little impact, the new sanctions are the first that could have a serious effect on Iran’s oil trade, 60 percent of its economy.

Sanctions signed into law by U.S. President Barack Obama on New Year’s Eve would cut financial institutions that work with Iran’s central bank off from the U.S. financial system, blocking the main path for Iran to receive payments for its crude.

The EU is expected to impose new sanctions by the end of this month, possibly including a ban on oil imports and a freeze of central bank assets.

Even Iran’s top trading partner China — which has refused to back new global sanctions against Iran — is demanding discounts to buy Iranian oil as Tehran’s options narrow. Beijing has cut its imports of Iranian crude by more than half for January.

Iran has responded to the tighter measures with belligerent rhetoric, spooking oil markets briefly when it announced last month it could prevent shipping through the Strait of Hormuz.

It then held 10 days of naval exercises in the Gulf, test firing missiles that could hit U.S. bases in the Middle East. Tuesday’s apparent threat to take action against the U.S. Navy in international waters takes the rhetoric to a new level.

Experts still say they do not expect Tehran to charge headlong into an act of war — the U.S. Navy is overwhelmingly more powerful than Iran’s sea forces — but Iran is running out of diplomatic 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.”

Henry Wilkinson at Janusian Risk Advisory consultants said the threats might be a bid by Iran to remind countries contemplating sanctions of the cost of havoc on oil markets.

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