EU Applies Squeeze On The Iranian Economy

USS Abraham Lincoln Steams Though The Straits Of Hormuz

The USS Abraham Lincoln aircraft carrier traveled through the Strait of Hormuz on Sunday without incident, as Iran backed down from a previous threat against U.S. ships entering into the Persian Gulf.

U.S. Naval Forces Central Command released a statement that said the USS Abraham Lincoln “completed a regular and routine transit of the Strait of Hormuz."

The Strait of Hormuz

The Strait of Hormuz, a key oil shipping lane, had been the source of high tensions between the United States and Iran in recent weeks, with Iran making several threats. But after the United States essentially called Iran’s bluff, the country moved away from its threats this weekend.

Iran’s threat last month that it would close the Strait of Hormuz altogether and disrupt oil shipping if Western countries followed through on their economic sanctions.

Europe banned the import of Iranian oil today and froze Europe-based assets of the Central Bank of Iran, intensifying an international campaign to choke Iran’s economy and force the radical Islamic government to dispel fears that it is working to develop nuclear weapons.

UK Foreign Secretary, William Hague

The ban, decided by foreign ministers of the 27-nation European Union, is a dramatic escalation of sanctions against Iran, joining with the United States to squeeze the oil earnings and financial transactions that the Tehran government depends on to sustain its citizens and finance its military. The British foreign secretary, William Hague, called the E.U. effort “unprecedented” and said it shows the resolve of European governments to prevent Iran from becoming a nuclear power.






Countries such as Greece and Italy, suffering under crippling debt burdens, are likely to get more time before they have to break their financial ties with Iran, European diplomats said on condition of anonymity. Greece has been buying oil from Iran on credit and earns desperately needed money by refining crude for Balkan neighbors. Italy has arranged for Iranian oil in payment for loans granted by Rome in the past.

But still at issue is Iran’s nuclear program, which it says is for peaceful purposes but the United States and its allies warn is intended to make a nuclear weapon.

The United States implementation of sanctions against Iran’s central bank was designed to target its oil industry, and the European Union is following US on oil embargo against Iran. The idea behind the sanctions is to cripple Iran’s economy in order to convince the country to abandon its nuclear ambitions.

Chineese Built Iranian Oil Tanker

But Iran does have the benefit of its contracts with Asian nations; in particular, about 60 percent of Iran’s 2.2 million barrels a day of exports have been locked into contracts with China, Japan and South Korea. Turkey accounts for an additional 7 percent. Traditionally, European customers have accounted for less than 20 percent of Iranian exports.

Nevertheless, powerful figures in Iran immediately threatened retaliation, according to news agency reports from Tehran. Their defiance, including calls to close the Strait of Hormuz, underlined the high stakes in the West’s confrontation with the Islamic government.

Washington is prepared to engage in war over the Strait of Hormuz at any moment, the Pentagon says. Some observers say the dangerous move is being viewed as a far from worst-case scenario in America, especially by its hawks.

Whenever you're ready Iran

American troops in the Persian Gulf region do not require any build-up for a possible military conflict with Iran, Defense Secretary Leon Panetta said "We are not making any special steps at this point in order to deal with the situation. Why? Because, frankly, we are fully prepared to deal with that situation now," Panetta explained.

The US says it will attack Iran if it tries to block the Strait of Hormuz, a crucial route for regional oil transit. Tehran has threatened to stop traffic through the Strait in response to mounting pressure, including threats, sanctions and particularly an air strike on its nuclear facilities, which Israel and the US say are on the table.

The US Navy has two aircraft carrier strike groups in the region at the moment, presumably performing a routine rotation. US troops are also stationed in a number of nearby countries, including the United Arab Emirates, Qatar, Kuwait and other Gulf nations. 

Minister, Sergey Lavrov

Panetta’s ready-for-war rhetoric was frowned upon by Beijing. China’s foreign ministry spokesman Liu Weimin commented on Thursday that “sanctions and military threats will not help solve the problem but only aggravate the situation.” Russia holds a similar position on the brewing conflict. "What Western states… have been adding as they adopt their additional unilateral sanctions against Iran has nothing in common with the desire to keep the nuclear weapons nonproliferation regime unshaken,” Russia’s Foreign Minister, Sergey Lavrov, warned at his Q&A conference on Wednesday.

Foreign Minister Ali Akbar Salehi

Meanwhile, Iranian Foreign Minister Ali Akbar Salehi has reiterated that Tehran wants talks on the nuclear issue, which Western powers cite as the main motive for sanctions against the country. But, Salehi maintained, it is up to the other parties, particularly the US and EU, to arrange a time and place for a meeting. 

“We want peace and tranquility in the region,” Salehi said during a visit to Turkey. “I am calling to all countries in the region; please don't let yourselves be dragged into a dangerous position.”

Catherine Ashton

At the same time, the EU’s foreign policy and security chief, Catherine Ashton, told journalists such a meeting is not being prepared at the moment.


US President Barack Obama is being pressured by domestic hawks to attack Iran, according to political analyst Igor Khokhlov from the Institute of World Economy and International Relations.

There is a lot of data that both the US and the Israeli military have gotten agreement from Obama that the attack will take place unless Iran totally dismantles its nuclear program. The plans for this attack have been developed since the early years of Obama's administration according to sources at several independent organizations currently monitoring the situation.

Go Ahead, Block The Straits

And while some real concern about the controversial Iranian nuclear program does exist all over the world, including China and Russia, the real objective for the US is regime change in Iran and installing a puppet government in Tehran, analyst believes.


Given the fact that there is a great deal of Israeli influence over US foreign policy, I believe that the real objective is to draw Iran into a full-scale war with the US and its mighty allies. The United States wants to invade Iran and replace the existing anti-American and anti-Israeli government with a new one that would be its ally, Khokhlov said.

What Iran will look like after campaign

Such a conflict would be on a greater scale and result in greater loss of life than the invasion of Iraq or Afghanistan, the expert believes. America does have very little hard and reliable intelligence data about each of the Iranian nuke sites and so their bombing will have to be extensive and long, kind of like a Yugoslavian campaign back 13 years ago, and the areas around the suspected sites will have to be turned into a Lunar landscape, he explained.

The uneasy tension in the region may result in a conflict running amok even against the wishes of the parties involved, warns Philip Giraldi, an ex-CIA officer who is currently the executive director of the Council for the National Interest think-tank. The worst-case scenario would be a world war, he says.

Philip Giraldi

The Iranian currency, the rial, tumbled Monday in blackmarket trading to a new record low against the dollar, news agencies said, as the EU moved to impose an oil embargo and fresh sanctions on Tehran. 


The unofficial rate in central Tehran was around 20,500 rials for the greenback, the official IRNA news agency reported.


The rate showed a 12-percent rise for the US currency since last Wednesday when it was changing hands at 18,000 rials on the blackmarket.

The Tehran government has tried to shore up the rial by imposing a lower rate in banks and currency exchange bureaux, while also banning transactions outside of such outlets, leading to the blackmarket operations.


Last week, Iran's central bank banned the possession of and transactions in foreign currencies, including the dollar, without an official invoice, warning that offenders would be prosecuted.

The bank has introduced a dual rate of 11,300 rials for state business and imports, and 14,000 for Iranian travelers.

But many exchange bureaux have refused to buy or sell dollars at the imposed rates, prompting the operation of a blackmarket despite police efforts to enforce the ban.

In late October, it cost about 12,500 rials to buy a dollar in Tehran.

A rush for gold and other non-currency assets has since taken hold, with the price of gold coins in Iran rising by 25 percent since January 18.

The currency crisis comes at a time when the United States and European countries are ratcheting up punitive measures against Iran to curb its controversial nuclear programme.

Although the Iranian government has insisted there is no connection between the rial's slide and new sanctions, some officials have admitted a "psychological" impact as international sanctions spook ordinary Iranians.

Minister Shamseddin Hosseini

Economy Minister Shamseddin Hosseini and central bank Chief Mahmoud Bahmani have vowed before the Iranian parliament to bring the exchange rate under control.

A sudden acceleration in the slide was seen after US President Barack Obama at the end of December signed into law more sanctions hitting Iran's central bank and targeting foreign firms which do business with the Islamic republic.

A compromise agreement, due to be formally announced later the same day, provides for an immediate ban on importing Iranian crude and a gradual phase-out of existing contracts between now and July 1, diplomats in Brussels said. EU ministers were set to also target the country's central bank, petrochemicals and gold.

The sanctions would make it even more difficult for Iran, OPEC's second largest producer, to be paid in foreign currency for its oil exports, worth more than 100 billion dollars in 2011. Previous rounds of EU and US sanctions targeting Iran's financial system have already caused a shortage of foreign currency.