Iran Threatens the Use of the Oil Weapon

In a recent interview on Al Jazeera television Iran’s Oil Minister Rostam Qaesemi, commenting on Iran’s Oil exports, brazenly threatened, “In case we are urged to and feel it necessary, we will use it as a political tool.” This amidst his comments that currently Iran will seek a “fair price”, whatever that means, at the Organization of Petroleum Exporting Countries’ next meeting on December 14.

As we know, OPEC is always seeking a “fair price”.

But the burnishing aside, the threat made is clear. Iran stands ready to withhold oil exports as a matter of policy if it feels it would be advantageous to its political goals and has now clearly put that option on the table. It has been made under the assumption that the any disruption in Iran’s oil exports would, according to Rostam Qaesemi, cause severe problems for the global crude market.

Now that Iran has unsheathed that threat, a riposte is called for by those threatened by its oil policies and other elements of its renegade foreign policy and nuclear undertakings.

Rostam Qaesemi’s assessment of the crippling potential of withholding Iranian oil is not only wrong but should be countered with unified policy of embargoing all shipments of Iranian oil, much as European countries have initiated against Syria, consumers of 90 percent of its exports.

As discussed previously in my posts, Iran exports some 2.4 million barrels of oil daily, a quantity of oil that could readily be covered by bringing into production the idle capacity of the Gulf Cooperation Council comprising Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman. Saudi Arabia currently has spare capacity of some 4 million barrels/day sitting idle. To counter Iran’s threat of using the oil weapon, it would require the cooperation of these national entities with the clear understanding that Iran’s export capacity would be replaced with no upside impact on oil prices.

Just recently, with an eye on a belligerent Iran, the Obama Administration announced plans to bolster the American military presence in the Persian Gulf, seeking to expand military ties with the nations of the Gulf Cooperation Council attempting to foster a new “security structure”. The United States is already burning in excess of $100 million a day keeping a naval task force in the Gulf.

Bringing pressure or persuasion to end purchases of Iran’s oil, in the same spirit as Europe’s embargo, could play a major role in diminishing the cash flow to the Iranian mullahs for whom oil revenues are key to their authoritarian hegemony over their fellow citizens. Below please find a recompilation of ranked Iranian oil destinations (thousand bbls/day) in 2005 (not included is an important Iranian oil buyer, India) :

Japan 685,000
China 284,000
South Korea 195,000
Italy 193,000
France 142,000
Netherlands 139,000
Turkey 138,000
South Africa 134,000
Taiwan 125,000

All this while North America is on the precipice of energy independence given the extensive increases in natural gas reserves and new developments toward shale oil and tar sands production. The United States alone, as reported in the Financial Times:

Many analysts expect that in the coming decade the US will leapfrog Saudi Arabia and Russia to become the world’s largest producer of liquid hydrocarbons, counting both crude oil and lighter gas liquids such as propane and ethane. The optimism reflects the increasing flow of “tight oil” and gas from shale- rock formations holding reserves unlocked through new extraction technologies.

All this raises the existential question: why should the United States bear the burden of protecting or even involving itself with the far off Gulf Cooperation Council if they are not prepared to assume the weight of their responsibilities? Cooperation that would prove instrumental in a successful, yet non bellicose, confrontation with Iran.

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