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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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War Imminent in Straits of Hormuz? $200 a Barrel Oil?

The pieces and policies for potential conflict in the Persian Gulf are seemingly drawing inexorably together.
Since 24 December the Iranian Navy has been holding its ten-day Velayat 90 naval exercises, covering an area in the Arabian Sea stretching from east of the Strait of Hormuz entrance to the Persian Gulf to the Gulf of Aden. The day the maneuvers opened Iranian Navy Commander Rear Admiral Habibollah Sayyari told a press conference that the exercises were intended to show "Iran's military prowess and defense capabilities in international waters, convey a message of peace and friendship to regional countries, and test the newest military equipment." The exercise is Iran's first naval training drill since May 2010, when the country held its Velayat 89 naval maneuvers in the same area. Velayat 90 is the largest naval exercise the country has ever held.
The participating Iranian forces have been divided into two groups, blue and orange, with the blue group representing Iranian forces and orange the enemy. Velayat 90 is involving the full panoply of Iranian naval force, with destroyers, missile boats, logistical support ships, hovercraft, aircraft, drones and advanced coastal missiles and torpedoes all being deployed. Tactics include mine-laying exercises and preparations for chemical attack. Iranian naval commandos, marines and divers are also participating.
The exercises have put Iranian warships in close proximity to vessels of the United States Fifth Fleet, based in Bahrain, which patrols some of the same waters, including the Strait of Hormuz, a 21 mile-wide waterway at its narrowest point. Roughly 40 percent of the world's oil tanker shipments transit the strait daily, carrying 15.5 million barrels of Saudi, Iraqi, Iranian, Kuwaiti, Bahraini, Qatari and United Arab Emirates crude oil, leading the United States Energy Information Administration to label the Strait of Hormuz "the world's most important oil chokepoint."
In light of Iran’s recent capture of an advanced CIA RQ-170 Sentinel drone earlier this month, Iranian Navy Rear Admiral Seyed Mahmoud Moussavi noted that the Iranian Velayat 90 forces also conducted electronic warfare tests, using modern Iranian-made electronic jamming equipment to disrupt enemy radar and contact systems. Further tweaking Uncle Sam’s nose, Moussavi added that Iranian Navy drones involved in Velayat 90 conducted successful patrolling and surveillance operations.
Thousands of miles to the west, adding oil to the fire, President Obama is preparing to sign legislation that, if fully enforced, could impose harsh penalties on all customers for Iranian oil, with the explicit aim of severely impeding Iran’s ability to sell it.
How serious are the Iranians about the proposed sanctions and possible attack over its civilian nuclear program and what can they deploy if push comes to shove? According to the International Institute for Strategic Studies’ The Military Balance 2011, Iran has 23 submarines, 100+ “coastal and combat” patrol craft, 5 mine warfare and anti-mine craft, 13 amphibious landing vessels and 26 “logistics and support” ships. Add to that the fact that Iran has emphasized that it has developed indigenous “asymmetrical warfare” naval doctrines, and it is anything but clear what form Iran’s naval response to sanctions or attack could take. The only certainty is that it is unlikely to resemble anything taught at the U.S. Naval Academy.
The proposed Obama administration energy sanctions heighten the risk of confrontation and carry the possibility of immense economic disruption from soaring oil prices, given the unpredictability of the Iranian response. Addressing the possibility of tightened oil sanctions Iran’s first vice president Mohammad-Reza Rahimi on 27 December said, “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz.”
Iran has earlier warned that if either the U.S. or Israel attack, it will target 32 American bases in the Middle East and close the Strait of Hormuz. On 28 December Iranian Navy commander Rear Admiral Habibollah Sayyari observed, "Closing the Strait of Hormuz for the armed forces of the Islamic Republic of Iran is very easy. It is a capability that has been built from the outset into our naval forces' abilities."
But adding an apparent olive branch Sayyari added, "But today we are not in the Hormuz Strait. We are in the Sea of Oman and we do not need to close the Hormuz Strait. Today we are just dealing with the Sea of Oman. Therefore, we can control it from right here and this is one of our prime abilities for such vital straits and our abilities are far, far more than they think."
There are dim lights at the end of the seemingly darker and darker tunnel. The proposed sanctions legislation allows Obama to waive sanctions if they cause the price of oil to rise or threaten national security.
Furthermore, there is the wild card of Iran’s oil customers, the most prominent of which is China, which would hardly be inclined to go along with increased sanctions.
But one thing should be clear in Washington – however odious the U.S. government might find Iran’s mullahcracy, it is most unlikely to cave in to either economic or military intimidation that would threaten the nation’s existence, and if backed up against the wall with no way out, would just as likely go for broke and use every weapon at its disposal to defend itself. Given their evident cyber abilities in hacking the RQ-170 Sentinel drone and their announcement of an indigenous naval doctrine, a “cakewalk” victory with “mission accomplished” declared within a few short weeks seems anything but assured, particularly as it would extend the military arc of crisis from Iraq through Iran to Afghanistan, a potential shambolic military quagmire beyond Washington’s, NATO’s and Tel Aviv’s resources to quell.
It is worth remembering that chess was played in Sassanid Iran 1,400 years ago, where it was known as “chatrang.” What is occurring now off the Persian Gulf is a diplomatic and military game of chess, with global implications.
Washington’s concept of squeezing a country’s government by interfering with its energy policies has a dolorous history seven decades old.
When Japan invaded Vichy French-ruled southern Indo-China in July 1941 the U.S. demanded Japan withdraw. In addition, on 1 August the U.S., Japan’s biggest oil supplier at the time, imposed an oil embargo on the country.
Pearl Harbor occurred less than four months later.

By. John C.K. Daly of Oilprice.com

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  • Philip on December 30 2011 said:
    What a very interesting article! Well written and intelligent. Thank you John Daly.The Iranians are indeed playing a game of chess with bthe West-and winning. Not as in checkmate but as in innumerable 'checks' that effectively render the western game ineffective. It must have come as a huge shock to the Americans to have the Iraqnians take over one of their most advanced drones with all its secrets. Of course as in all these matters there is always the possibility that the US used a drone to test Irans capability and find out what they were up against...Either way the Iranians still have the upper hand in the area. And the West is stuck for a response. The Iranian chess master is still the chess master...tbc...
  • Philip on December 30 2011 said:
    continued...I think the West will continue to sail very close to the wind for a long time, but always pulling back at the last moment. The Western economies are too fragile and Western militaries too exhausted to take on another war that they can't win.
  • Fred Banks on December 30 2011 said:
    Hmm. Ahmadinejad was invited to Columbia University to be made a fool of, and to my way of thinking he made a fool of the people who issued the invitation. Good for him, I remember telling a few people.I have known and taught many Iranians, and they were VERY intelligent people. Yes, they can make a mistake, but nobody with any sense at all would bet on it. Of course, where wars are concerned, if you knock on any door you can find someone who aches for one - as long as they don't have to pick up a rifle.The simple truth is that war in the Gulf is completely unnecessary, and the logic here should be clear to anyone who saw the result of the Libyan exercise on the oil price.
  • Prince Siddhartha on December 30 2011 said:
    Just a correction. Chess started in India not Persia around the 4th century Ad where it was known as Shatrang. "Shacka or check" and Shatrang are Sanskrit words. But, going back to the topic at hand, even through the mullahs in Iran are nasty, medieval, primitive, barbaric, a war with Iran would be disastrous for the global economy.So, I hope the world teads with extreme caution here.
  • Co-opted Confederate on December 30 2011 said:
    So Where is Bobby Ficher when we need him? Ficher should have a job eith the Secratary of Defense. if the rag head wanna play World War III style chess, I'm sur Obama will cut a deal for one of the Reuusian chess Champs to assist us in throttleing Iran back to the Stone age, with out Nukes.
  • Philip on December 31 2011 said:
    'But, going back to the topic at hand, even through the mullahs in Iran are nasty, medieval, primitive, barbaric'Why do you say that? These are the people who are the chess players, who have allowed Iranian women to progress in society, and who allow Iranian youth to have a Western lifestyle within limits, and who brought down Western hi tech sophistication. Watch 'Rageh Omar in Iran' its on Youtube. Very different to the propaganda...
  • Philip on January 01 2012 said:
    Co-opted Confederate 2011-12-31 04:56 "So Where is Bobby Ficher when we need him? Ficher should have a job eith the Secratary of Defense. if the rag head wanna play World War III style chess, I'm sur Obama will cut a deal for one of the Reuusian chess Champs to assist us in throttleing Iran back to the Stone age, with out Nukes."I was hoping we wouldn't have to put up with comments like vthis on this website. Why don't we vote him down for being the (rag head) pee wit that we really could do without here...? Sorry if I'm being intolerant but this kind of comment gets up my nose...
  • Philip on January 01 2012 said:
    Further to my first comment we've been at $100 pb for almost 2 months now. Inflation is impacting while the Russians and Iranians are swimming in an ocean of petrodollars. They are alreay winning without even doing anything in the Straits. I mean all that has to happen is for a mullah or IRGC commander to blow his nose at the Straits and the pricve of oil plus insurance for shipping goes through the roof. They have us by the proverbials and all the US navy carrier groups in the world and the fleets of strategic bombers can't do a thing about it. This is 'invisible' chess and no chess grand master could play it because the board is - everywhere. The best person to play this kind of game would be an ex-KGB man or an ex-IRGC man - if you could trust them...The best advice for the West is to seek accomodation. We cannot take on Iran, Russia and China. Best instead to clear out our own Augean stables.
  • CompassionateFascist on January 01 2012 said:
    Factoring in current US carrier battle group deployments and refitting schedules, the Iran War will begin c. July-September 2012. Combine that certain debacle with an existential political crisis via a 3-way Presidential race + a late-2012 economic collapse (possibly via IranWar $250/barrel oil spike), and we are looking at a Perfect Storm. Invest in lead.
  • phd on January 02 2012 said:
    What hasn't been discussed is what the Rothchilds have decided. They will, I'm sure, bankroll the military aspect of this next war.
  • Fred Banks on January 02 2012 said:
    Philip, I just finished commenting on an article in which a Cold War type flexed his muscles, and threated the I-ranians with instant destruction.With all due respect, I think that the US has enough to do in the great 48 thanto parade and posture around the Gulf. I just hope that the next president of the US gets this message, although I see no reason to be optimistic at the present time.
  • Bob Boudro on January 02 2012 said:
    If memory serves Iran's last conflict of note was an 8 year non-conclusive war with Iraq.Yes that's the chess-master Saddam's forces that we brought to it's knees with 18 hours of "shock & awe".It makes no sense to "engage" these blowhards, they are but an irritant. But on the other hand let's not attribute them any serious Military capabilities.The greatest threat their Navy poses to oil supply through the Persian Gulf is the shallow draft their Navy would cause, piled up on the bottom!.
  • retired Sam on January 04 2012 said:
    Interesting thought, and I like the informative report. but let us also include that the US has the capability to conduct a widespread attack and cripple Iran in the near term like it did Libya a few years ago. Part of the equation includes does Washington's leadership have the balls to stand up for real values or are they wishy-washy? I am not encouraging the attack, just that we don't always discuss all the options we have at our disposal. don't be afraid to lay all the marbles on the table, get support from many other world and regional leaders, build a coalition and do what is needed, what is right.
  • Zhang Fei on January 08 2012 said:
    Ultimately, navies require land bases. Unless the Iranians are retarded - which I doubt - they know that the US is in a position to demolish their land bases, thereby knocking out their ability to resupply themselves. The US is also in a position to completely end Iranian oil production. This is why Iran will not do anything in response to further sanctions. Ultimately, they are husbanding their resources for a time when the US pulls out of the region, thereby freeing Iran to attempt to reconstitute the Persian empire of antiquity. Until then, the Iranian military is little but a speed bump for American forces in the region.

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