Iran’s Revolutionary Guards threaten to cut off regional oil exports amid US pressure

  • Shortly after the Trump administration reaffirmed this week its threat to punish companies that buy Iranian crude, President Hassan Rouhani warned Tehran could soon disrupt oil shipments to neighboring countries.
  • Washington’s sanctions against Iran are set to be re-imposed on November 4.
  • International benchmark Brent crude traded at around $78.14 Thursday lunchtime, around 0.1 percent lower, while U.S. West Texas Intermediate (WTI) stood at around $74.48, up 0.4 percent.

Iran is threatening to dramatically ratchet up its response to the U.S., if President Donald Trump succeeds in halting crude sales from the Persian Gulf when sanctions snap back on the country.

Shortly after the Trump administration reaffirmed this week its threat to punish companies that buy Iranian crude, President Hassan Rouhani warned Tehran could soon disrupt oil shipments to neighboring countries.

Iran’s president did not elaborate on such plans, but the leading commander of Iran’s Revolutionary Guard, an elite branch of the military, said Wednesday that he would be prepared to enact any presidential orders to block exports of crude to the Gulf.

In a letter published on Islamic Republic News Agency (IRNA), Major-General Qassem Soleimani said: “I kiss (Rouhani’s) hand for expressing such wise and timely comments, and I am at your service to implement any policy that serves the Islamic Republic.”

Washington’s sanctions against Iran are set to be re-imposed on November 4.

Oil prices could climb ‘well into triple figures’

Iran, OPEC’s third-largest producer, has previously warned that it could close the Strait of Hormuz, a major oil shipping route for Persian Gulf nations to the Arabian Sea.

“Around 17 million barrels per day or 35 percent of all seaborne oil exports pass through the strategic waterway and, needless to say, such a move would propel oil prices well into triple figures,” Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note published Thursday.

A support vessel maneuvers near the crude oil tanker 'Devon' as it sails through the Persian Gulf towards Kharq Island oil terminal to transport crude oil to export markets in Bandar Abbas, Iran, on Mar. 23, 2018.
Ali Mohammadi | Bloomberg | Getty Images
A support vessel maneuvers near the crude oil tanker 'Devon' as it sails through the Persian Gulf towards Kharq Island oil terminal to transport crude oil to export markets in Bandar Abbas, Iran, on Mar. 23, 2018.

“Iran’s leadership is clearly adamant that the new situation created by the U.S. withdrawal from the nuclear pact will not go without consequences. This, in turn, should go a long way to ensuring that the geopolitical premium remains alive and well,” he added.

International benchmark Brent crude traded at around $78.14 Thursday lunchtime, around 0.1 percent lower, while U.S. West Texas Intermediate (WTI) stood at around $74.48, up 0.4 percent.

Vienna meeting

In May, Trump withdrew the U.S. from a multinational deal under which sanctions on Iran were lifted in return for curbs to its nuclear program. That deal was verified by the International Atomic Energy Agency (IAEA).

However, after previously warning Trump of the “consequences” Washington would face for reviving fresh sanctions against Iranian crude, Rouhani has also said he is prepared to scale down the country’s cooperation with the United Nations’ nuclear watchdog.

“Iran’s nuclear activities have always been for peaceful purposes, but it is Iran that would decide on its level of co-operation with IAEA,” Rouhani was quoted as saying by IRNA on Wednesday.

Meanwhile, the EU has pledged to preserve the 2015 nuclear accord — without the U.S. — by trying to keep Iran’s oil and investment flowing. But the prospect of U.S. sanctions is thought to have made it very difficult for European officials to offer any guarantees to Tehran.

Foreign ministers from Russia, China, Britain, Germany and France will meet Iranian officials in Vienna on Friday to discuss how to keep the accord alive.