Iran threats churn fears of higher oil prices

Miscalculation could set off conflict

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The small boats, minisubs and guerrilla tactics of an Iranian militia pose the greatest threat to oil shipping in the Persian Gulf, where even a single incident would send oil prices spiraling upward, analysts say.

The naval exercises and missile tests with which Tehran greeted the new year may be saber-rattling, but observers worry that a miscalculation by Iran or the West could ratchet up a standoff into open conflict.

Just the heated rhetoric of recent days has driven oil prices higher, as insurance premiums rise and traders seek to hedge against a reduction in global supply that might result from a military confrontation in the Gulf, through which one-sixth of the whole world’s petroleum passes to reach the open seas.

Oil prices jumped 4 percent Tuesday but held steady Wednesday, falling back after a midday spike.

The burgeoning standoff began when Iran’s vice president threatened last week to close the strategically vital waterway if additional international sanctions were imposed on Iran. Tehran also conducted a series of naval exercises and missile tests in the Gulf over the New Year’s weekend.

U.S. officials in turn have pledged to maintain international freedom of navigation in the Gulf.

Behind the rhetoric is a growing wave of international concern about Iran’s nuclear program, and the threat by European and even Gulf countries to join U.S.-led sanctions against Iran’s oil industry and central bank.

The Islamic regime in Tehran is “being subjected to a level of pressure [both domestically and internationally] they’ve never been under before,” said Anthony Cordesman, the Arleigh A. Burke professor of strategy at the Center for Strategic and International Studies.

Although it is clearly not in Iran’s interest to provoke a U.S. military response, “you can, unfortunately, not rule out the possibility of unintended escalation,” he said.

Mr. Cordesman noted that Iran’s militia, the Islamic Revolutionary Guard Corps Navy (IRGCN), has decentralized decision-making and a history of independent, aggressive actions against coalition naval forces and international shipping.

Since 2007 and 2008, when Iran reorganized its naval forces, the IRGCN has had the lead role in the Gulf, with Iran’s regular navy relegated largely to a “soft power” role in the waters beyond the Strait of Hormuz, the 34-mile-wide bottleneck at the mouth of the Gulf, U.S. Navy Cmdr. Joshua C. Himes said.

“Giving the IRGCN primary responsibility in the Gulf amplifies the natural benefits of a small, fast, unconventional force operating in its own backyard,” Cmdr. Himes wrote in a July assessment of Iranian naval power.

He noted that the militia is emphasizing speed, stealth and numbers over tonnage in its acquisitions, buying minisubs and small, fast boats armed with anti-ship missiles.

Estimates vary, but the IRGCN might have as many as 3,000 small boats, which could be packed with explosives for suicide attacks or deployed in massive “swarm attacks” against much larger and vastly more expensive U.S. or coalition naval vessels.

A 2002 Pentagon war game, playing out a scenario in which the enemy used such tactics against the U.S. Navy in the Gulf, had to be stopped because most of the U.S. fleet was “sunk,” one of the participants, retired Ambassador Robert Oakley, told the Army Times, an independent newspaper, at the time.

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