Iran bluffing with threat to block oil passageway, military analysts say

Iranian officials were bluffing this week when they threatened to shut down the Strait of Hormuz so that “not even a drop of oil” would go through the key passageway, military analysts say.

In reality, Iran has little ability to successfully blockade the strait — a gateway for nearly one-fifth of the world’s oil — and the U.S. Navy would overpower Iran’s military if it tried.

“It’s a little bit hard to imagine when you start looking at nuts and bolts of how oil gets in and out of the area,” said Caitlin Talmadge, a George Washington University assistant professor who has studied the Strait of Hormuz.

Even if Iran did manage to close the strait, it would pay a heavy price, as doing so would also devastate the country’s own economy, which is heavily reliant on oil exports.

Analysts say Iran can still cause problems in the strait that would cause oil prices to shoot upwards, even if the disruption would be small and short-lived. The threat of military escalation also could push oil prices higher even if no military action occurs.

Rising oil prices help Iran’s economy, so the threat also makes financial sense.

“This is the classic case where Iran benefits from making the threat even if it wouldn’t benefit from actually fulfilling the threat,” said Talmadge. “Iran would ultimately pay a pretty high price for following through.”

Iran’s threats to close the strait were made in response to potential tougher U.S. and European economic sanctions that could harm Iran’s oil exports.

Iran’s Navy Chief Habibollah Sayari said closing the strait to oil exports would be “easier than drinking a glass of water.”

The rhetoric coincided with a 10-day military war games exercise the Iranians are running near the strait in the Persian Gulf between Iran and Oman.

U.S. military officials said this week that any attempt to disrupt oil tankers in the strait would be blocked. The U.S. Navy’s Fifth Fleet, based in Bahrain, would respond quickly to any Iranian military action in the strait, they said.

“The free flow of goods and services through the strait of Hormuz is vital to regional and global prosperity,” Navy Lt. Rebecca Rebarich, a spokeswoman for the U.S. 5th Fleet, said in an e-mail. “Any disruption will not be tolerated.”

Analysts said Iran and the U.S. aren’t looking for a military conflict, but the danger is the situation could escalate.

President Obama is expected to soon sign a bill that includes a provision for harsher sanctions against the Central Bank of Iran, cutting off U.S. support to businesses that deal with the bank.

“It essentially makes countries choose to do business in Iranian gas and oil or with the U.S., and most are going to choose the U.S.,” said Matthew Kroenig, a former Pentagon adviser and fellow at the Council on Foreign Relations. “This is basically a bluff trying to get the U.S. not to go through with this next round of sanctions.”

State Department spokesman Mark Toner said Iran’s latest threats were “another attempt by them to distract attention away from the real issue, which is their continued noncompliance with their international nuclear obligations.”

While an attempt to shut down the strait would hurt Iran’s economy, it could also roil the world’s oil markets.

Hans Erik Christensen, managing director at Global Risk Management, a Denmark-based company that assesses risk in the oil market, predicts “oil prices will surge if Iran attempts to close the Strait of Hormuz.”

“Iran might have the capability to disrupt the strait for a few days with significant influence on the Gulf countries, oil prices and the world economy,” he said in an e-mail. “If we see the wrong combination, we fear that prices will touch all time high.”

The price of crude oil hovered around $100 per barrel to end the year as the market assessed Iran’s threat.

Alireza Nader, an analyst specializing in Iran at the RAND Corporation, said Iran is trying in part to prove it can retaliate against foreign sanctions. “Iran is trying to show it’s not completely helpless to U.S. pressure,” Nader said.

Iran’s domestic politics also play a role, as the country has parliamentary elections coming up in March and a presidential election in 2013. Appearing “tough on the United States” is a political winner.

Nader said dissatisfaction with Iranian leaders has not dissipated since the 2009 protests, and officials are concerned about internal instability.

“It’s not a time that the regime can appear weak and vulnerable,” Nader said.

Iran could use a number of tactics considered asymmetric warfare to disrupt oil tankers, from harassing and surrounding tankers with small boats to laying mines in the sea. Iran also has anti-ship cruise missiles on the coastline that could be used in attacks.

Kroenig, who advised the Pentagon on Iranian policy last year, said the U.S. military has made contingency plans for Iranian attempts to disrupt the strait.

“We’d strike back hard against all of that,” Kroenig said. “We could destroy the [Iranian] navy, destroy the rockets and ballistic missiles on the shore.”

Still, most analysts thought Iran’s threats were unlikely to amount to action — unless someone overreacts.

“We have a situation here where tensions are escalating, and they may reach the point where one side or the other — or both — miscalculate,” Nader said. “And out of that miscalculation we could have a war.”