SODOM & GOMORRAH: Oil prices rose to close to $100 per barrel and natural gas prices jumped 7% as Iran reiterated its threat to block shipments of crude oil from the Persian Gulf. Iran claims it will go ahead with the blockade if the West follows through on its threat to embargo the country.
Much to the applause of the United States and Israel, the European Union agreed to stop buying Iranian oil after July and froze assets of Iran’s central bank. Politicians state that the goal of such measures is to force the beleagured country into talks with the West about its nuclear program. The embargo won’t have much of an effect; Iran will simply divert oil to China at below-market rates, which in turn will cause China to buy less from other countries that sell to Europe.
Iran is lying. They simply don’t have the ability to stop international commerce any more than they had the ability to send their navy to the Atlantic seaboard.
Navies are incredibly expensive to operate. They’re even more expensive to use in active conflict with a superior force. The United States already has ships in the area and would retaliate in the event of any serious disruption in trade through the Strait of Hormuz. One supporting piece of evidence is America’s overall reluctance to allow even themselves to interrupt trade that it feels is of strategic importance. Witness BP’s probable exception from American sanctions in hopes of weaning Europe off of Russian oil.
The entire thing is a game. Iran’s problem is that they have no credibility in their threats and no strategy to unify their actions – that and the United States has more guns.