Iran faces EU sanctions

By NASSER KARIMI
and BRIAN MURPHY

Associated Press

TEHRAN, Iran — Senior Iranian lawmakers have stepped up threats that Islamic Republic warships could block the Persian Gulf’s oil tanker traffic after the latest blow by Western leaders seeking to rein in Tehran’s nuclear program: A punishing oil embargo by the European Union that sharply raises the economic stakes for Iran’s defiance.

The EU decision taken Monday in Brussels — following the U.S. lead to target Iran’s critical oil exports — opened a new front against Iran’s leadership. Pressure is bearing down on the clerical regime from many directions, including intense U.S. lobbying to urge Asian powers to shun Iranian crude, a nose-diving national currency and a recent slaying in what Iran calls a clandestine campaign against its nuclear establishment.

In response, Iranian officials have turned to one of their most powerful cards: The narrow Strait of Hormuz at the mouth of the Gulf and the route for a fifth of the world’s oil.

Iran has rattled world markets with repeated warnings it could block the hook-shaped waterway, which could spark a conflict in the Gulf.

Military experts have questioned whether Iran has the naval capabilities to attempt a blockade. But the U.S. and allies have already said they would take swift action against any Iranian moves to choke off the 30-mile wide strait — where the American aircraft carrier USS Abraham Lincoln, along with British and French warships, entered the Gulf on Sunday without incident.

The British Ministry of Defense said the three nations sought to “underline the unwavering international commitment to maintaining rights of passage under international law.”

Earlier this month, Gen. Martin Dempsey, chairman of the U.S. Joint Chiefs of Staff, told CBS’ “Face the Nation” that Iranian forces could block shipping through the strait “for a period of time,” but added “we can defeat that” and restore the flow of oil and other commerce.

He did not offer details on a U.S. military response, but the Pentagon is believed to have contingency plans for such a scenario.

A member of Iran’s influential national security committee in parliament, Mohammad Ismail Kowsari, said Monday that the strait “would definitely be closed if the sale of Iranian oil is violated in any way.” He went on to warn the U.S. against any “military adventurism.”

Another senior lawmaker, Heshmatollah Falahatpisheh, said Iran has the right to shutter Hormuz in retaliation for oil sanctions and that the closure was increasingly probable, according to the semiofficial Mehr news agency.

“In case of threat, the closure of the Strait of Hormuz is one of Iran’s rights,” Falahatpisheh said. “So far, Iran has not used this privilege.”

The lawmakers’ comments do not directly reflect the views of Iran’s ruling clerics, but they echo similar statements made earlier this month by military commanders with close ties to the theocracy.

At the same time, however, Iran has tried to ease tensions by offering to reopen nuclear talks with the U.S. and other world powers after a one-year gap, and backing off warnings about U.S. naval operations in the Gulf — where the U.S. Navy 5th Fleet has a base in Bahrain.

On Monday in Brussels, the EU’s foreign policy chief Catherine Ashton urged Iran to offer “some concrete issues to talk about.”

“It is very important that it is not just about words; a meeting is not an excuse, a meeting is an opportunity and I hope that they will seize it,” she said as the EU adopted its toughest measures on Iran with an immediate embargo on new oil contracts and a freeze of the country’s Central Bank assets. About 90 percent of the EU’s nearly $19 billion in Iranian imports in 2010 were oil and related products, according to the International Energy Agency.

On Monday, the U.S. added new sanctions on Bank Tejerat, Iran’s third-largest bank. President Barack Obama has also approved new sanctions on Iran’s powerful central bank that take effect later this year.

It follows U.S. sanctions enacted last month that target the Central Bank and its ability to sell petroleum abroad. The U.S. has delayed implementing the sanctions for at least six months, worried about sending the price of oil higher at a time when the global economy is struggling. On Monday, benchmark crude pushed above $99 a barrel after the EU sanctions and the renewed threats to close the Strait of Hormuz.

“This is not a question of security in the region,” said German Foreign Minister Guido Westerwelle. “It is a question of security in the world.”

In Washington, a joint statement by Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner said the EU move “will sharpen the choice for Iran’s leaders and increase their cost of defiance” over the country’s nuclear program.

But there are no signals from Iran that the tougher sanctions will force concessions on the core dispute: Iran’s ability to enrich uranium.

Iran’s Foreign Ministry spokesman Ramin Mehmanparast was quoted by state TV as calling the EU sanctions “psychological warfare” to try to halt Iran’s nuclear program.

Iran’s leaders have consistently portrayed the country’s nuclear fuel labs as a symbol of national pride and part of efforts to become the Muslim world’s center for homegrown technology, including long-range missiles and rockets capable of reaching orbit. Iran says it seeks reactors only for energy and research, but the U.S. and others worry that the uranium enrichment will eventually lead to warhead-grade material.

Earlier this month, Iran said it was beginning enrichment at a new facility buried in a mountainside south of Tehran.

“Iran’s right for uranium enrichment is nonnegotiable,” said conservative Iranian lawmaker Ali Aghazadeh. “There is no reason for Iran to compromise over its rights. But Iran is open to discussions over concerns about its nuclear program.”

Russia — which strongly opposed the EU sanctions — said in a statement: “Under pressure of this sort, Iran will not make any concessions or any corrections to its policies.”

On the U.S. side, Obama may also be wary about political fallout from any negotiations in an election year.

No date has been set to resume talks. A more pressing task for OPEC’s No. 2 producer is assessing the sting from the EU slap.

The 27-nation bloc imposed an immediate halt to all new contracts for Iranian crude and petroleum products while existing ones are allowed to run until July. It also placed a freeze on the assets of Iran’s Central Bank.

About 80 percent of Iran’s oil revenue comes from exports, and any measures that affect its ability to export oil could hit hard at its economy, which is already staggering from widespread unemployment and a sinking currency that has sharply driven up the relative costs for imported goods.

Theodore Karasik, a security expert at the Dubai-based Institute for Near East and Gulf Military Analysis, called the struggling Iranian economy a potential “weak spot” for the ruling system as the country moves toward parliamentary elections in early March.

Reflecting the uncertainties, the Iranian rial fell Monday to a new low of nearly 21,000 to the dollar, a 14 percent drop since Friday, currency dealers said. A year ago, the rial was trading at 10,500 to the dollar.

Samuel Ciszuk, a consultant at KBC Energy Economics in Britain, said the sanctions will likely cause crude prices to rise in Europe and soften in Asia in the short term as more Iranian oil heads east. The sanctions will make it even harder for Iran to find customers for its oil and shipping companies willing to carry it.

“Iranian crude is being made the last choice. … You may be able to get it at a discount (outside the West), but how stable is the supply?” he said.

In order to sell supplies once destined for Europe, Iran may need to offer discounts to its main buyers in Asia such as Japan, South Korea and China. Ciszuk said there hasn’t been much sign Tehran is willing to do this so far, and it may prefer for now to divert the excess into storage.

U.S. officials, meanwhile, have been pressing Tehran’s main Asian oil markets to turn away from Iran.

China — which counts on Iran as its third-biggest oil supplier — has rejected sanctions and called for negotiations over Iran’s nuclear program.

South Korea, which relies on Iran for up to 10 percent of its oil supplies, was noncommittal on the U.S. sanctions. Japan, which imports about 9 percent of its oil from Iran, gave mixed signals but most recently expressed concern about how the sanctions would affect Japanese banks.

But all three nations sent high-profile delegations — including one led by Chinese Premier Wen Jiabao — to oil-rich Gulf Arab states this month for talks that left Iran fearful of efforts to undercut its crude exports.

Within Iran, meanwhile, security officials are on higher alert over what they claim is a covert campaign led by Israel’s Mossad and backed by the U.S. and Britain. On Jan. 11, a magnetic bomb placed on a car killed scientist who worked at Iran’s main uranium enrichment facility. It was at least the fourth targeted killing of a nuclear-related researcher in two years.

The U.S. denied any role in the January attack, but Israel’s military chief hinted that Iran could face incidents that happen “unnaturally.”

After the sanctions vote, British Prime Minister David Cameron, German Chancellor Angela Merkel and French President Nicolas Sarkozy issued a joint statement urging Iran to suspend its sensitive nuclear activities.

“Our message is clear,” the statement said. “We have no quarrel with the Iranian people. But the Iranian leadership has failed to restore international confidence in the exclusively peaceful nature of its nuclear program. We will not accept Iran acquiring a nuclear weapon.”