Is This How WW3 Will Start ?

Iran boasts of surveillance of aircraft carrier and claims U.S. ‘is not in a position’ to prevent blockage of major shipping lane

 e

Daily Mail

• Four mile-wide Strait of Hormuz is world’s most important oil route
• Iranian naval official says shutting tankers out of Strait would be ‘easier than drinking a glass of water’
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• Threat could push up the price of oil as Iran is world’s 4th-largest producer
• UN report in November claimed Iran is designing an atomic bomb
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• Sale of U.S. jets to Saudi Arabia is designed to balance Iran’s influence
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• Iran has ramped up its war of words with the U.S. – by revealing it filmed and photographed one of its aircraft carriers in the Persian Gulf.

Tensions between the two countries are escalating on an almost daily basis over Iran’s ongoing 10-day navy drill near the strategic Strait of Hormuz – the passageway for one-sixth of the world’s oil supply.

And a senior military leader insisted that ‘the U.S. is not in a position to affect Iran’s decisions’ or stop it carrying out its plans.

Hossein Salami, acting commander of the Revolutionary Guard, added: ‘Iran does not ask permission to implement its own defensive strategies.’

Tensions: Iran has ramped up its war of words with the U.S. – by revealing it filmed and photographed this aircraft carrier in the Persian Gulf

 

Escalating: Tensions between the two countries are escalating on an almost daily basis over Iran’s ongoing 10-day navy drill near the strategic Strait of Hormuz

 

Unknown: The U.S. doubts Iran will have gleaned any new information from its surveillance of thisaircraft carrier

The official IRNA news agency reported yesterday that a surveillance plane obtained the aircraft carrier footage, screen grabs of which are pictured here, in what has been seen as a clear indication that Iran wants to cast its navy as having a powerful role in the region’s waters.

But its report did not provide details and it was unclear what information the Iranian military could glean from such footage.

IRNA quoted Iran’s navy chief, Admiral Abibollah Sayyari, as saying the action shows that Iran has ‘control over the moves by foreign forces’ in the area.

He said: ‘An Iranian vessel and surveillance plane have tracked, filmed and photographed a U.S. aircraft carrier as it was entering the Gulf of Oman from the Persian Gulf.’

He added that the ‘foreign fleet will be warned by Iranian forces if it enters the area of the drill’.

Drill: Iran is holding a 10-day military exercise in international waters beyond the Strait of Hormuz – the passageway for one-sixth of the world’s oil supply

Training: The military drill has sparked a row between Iran and the U.S.

Gestures: Iran’s army navy commander Habibollah Sayyari spoke to reporters during the Velayat-90 war game on the Sea of Oman near the Strait of Hormuz

State TV showed what appeared to be the video. It was not possible to make out the details of the carrier because the footage was filmed from far away. But fighter jets and personnel can be made out.

Beyond the Strait lies vast bodies of water, including the Arabian Sea and the Gulf of Aden.

The U.S. Navy’s Bahrain-based 5th Fleet is also active in the area, as are warships of several other countries that patrol for pirates there.

Lt. Rebecca Rebarich, a spokeswoman for the U.S. 5th Fleet, said the aircraft carrier USS John C Stennis and guided-missile cruiser USS Mobile Bay headed out from the Gulf and through the Strait of Hormuz on Tuesday, after a visit to Dubai’s Jebel Ali port.

She described the passage through the strait as ‘a pre-planned, routine transit’ for the carrier, which is providing air support from the north Arabian Sea to troops in Afghanistan.

Rebarich did not directly address Iranian claims of possessing the reported footage but said the 5th Fleet’s ‘interaction with the regular Iranian Navy continues to be within the standards of maritime practice, well known, routine and professional’.

Today’s report follows U.S. warnings that it will not allow Iran to choke off one of the world’s busiest shipping routes in revenge for sanctions imposed on the country over its secretive nuclear programme.

Last night an American military official said that ‘any disruption will not be tolerated’ in the Strait of Hormuz, which is used by 40 per cent of the world’s oil tankers.

And a Pentagon spokesman warned that Iran would destroy its own ‘economic lifeline’ if it disrupted the international oil trade.

Tensions rose after Iran’s top naval commander bragged that shutting down the Gulf to oil tankers would be ‘easier than drinking a glass of water.’

Military personnel place an Iranian flag on a submarine in the Strat of Hormuz, as tensions escalate over the country’s apparent design of nuclear weapons

Lookout: A submarine performs naval maneuvers on the Sea of Oman during naval exercises in international waters

The threats triggered an angry response from the U.S. Fifth Fleet, based in Bahrain. ‘Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated,’ said a spokesman for the Bahrain-based fleet.

‘The free flow of goods and services through the Strait of Hormuz is vital to regional and global prosperity,’ he added.

Britain dismissed the Iranian boasts as an attempt to draw attention from its nuclear ambitions.

Playing down the threat, a Foreign Office spokesman said: ‘Iranian politicians regularly use this type of rhetoric to distract attention from the real issue, which is the nature of their nuclear programme.’

Tehran warned a week ago it would shut down the strategically vital shipping lane if the West took tougher action against Iran.

Vice President Mohammad Reza Rahimi said Iran wouldn’t allow ‘a drop of oil’ to pass through the strait if sanctions were widened.

The row ratcheted up another notch after Admiral Habibollah Sayyari, head of the Iranian navy, declared that ‘closing the Strait of Hormuz for Iran’ s armed forces is really easy – or as Iranians say it will be easier than drinking a glass of water.’

The comments drew a quick response from the U.S, with Pentagon press secretary George Little saying: ‘This is not just an important issue for security and stability in the region, but is an economic lifeline for countries in the Gulf, to include Iran.’

Iranian media have described how Iran could move to close the strait, saying the country would use a combination of warships, submarines, speed boats, anti-ship cruise missiles, torpedoes, surface-to-sea missiles and drones to stop ships from sailing through the narrow waterway.

Iran’s navy claims it has sonar-evading submarines designed for shallow waters of the Persian Gulf, enabling it to hit passing enemy vessels.

A closure of the strait could temporarily cut off some oil supplies and force shippers to take longer, more expensive routes that would drive oil prices higher. It also potentially opens the door for a military confrontation that would further rattle global oil markets.

Warning: Tehran said a week ago it would shut down the strategically vital shipping lane if the West took tougher action against Iran

Practice: Iranian military personnel pictured during training exercises

Threat: An Iranian politician claims the country’s military is preparing to close off the Strait of Hormuz

But Mark Toner, spokesperson for the U.S. State Department, responded: ‘It’s another attempt to distract attention away from the real issue, which is their continued non-compliance with their international nuclear obligations.’

Western tensions with Iran have increased since a U.N report claimed last month that Tehran appears to have worked on designing an atomic bomb.

Iran strongly denies this and insists it is developing nuclear energy for peaceful purposes.The possibility of imposing sanctions on Iran has divided U.N members.

Iran has defiantly expanded nuclear activity despite four rounds of U.N. sanctions meted out since 2006 over its refusal to suspend sensitive uranium enrichment.

Many diplomats believe only sanctions targeting Iran’s lifeblood oil sector might be painful enough to make it change course, but Russia and China – big trade partners of Tehran – have blocked such a move at the United Nations.

Important: Around a third of the world’s shipped oil passes through the Strait of Hormuz

The U.S. Congress has passed a bill banning dealings with the Iran Central Bank, and President Barack Obama has said he will sign it despite his misgivings. Critics warn it could impose hardships on U.S. allies and drive up oil prices.

The bill could impose penalties on foreign firms that do business with Iran’s central bank. European and Asian nations import Iranian oil and use its central bank for the transactions.

The threats to close the Strait of Hormuz coincided with a 10-day Iranian naval exercise in the Strait and nearby waters, a show of military force that began on Saturday.

‘Our enemies will give up on their plots against Iran only if we give them a firm and strong lesson,’ Mr Rahimi said.

Around a third of all shipped oil passes through the four mile-wide Strait between Oman and Iran and U.S. warships patrol the area to ensure safe passage.

Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq – together with nearly all the liquefied natural gas from lead exporter Qatar is transported through the channel.

Boast: Officials in Iran claim they can ‘mass produce’ the captured RQ-170 Sentinel drone and build a ‘superior’ version following its crash on December 4

After a news agency mistakenly reported the strait had already been closed, crude oil prices leapt by almost $2 to $100.45/per barrel, but they later stabilised.

Last month, Iran’s energy minister told Al Jazeera that Tehran could use oil as a political tool in the event of any future conflict over its nuclear program.

Tensions over the program have increased since the International Atomic Energy Agency(IAEA) reported on November 8 that Tehran appears to have worked on designing a nuclear bomb and may still be pursuing research to that end.

Iran has warned it will respond to any attack by hitting Israel and U.S. interests in the Gulf and analysts say one way to retaliate would be to close the Strait of Hormuz.

Last month former U.S. Vice-President Dick Cheney said President Obama should have ordered an airstrike over Iran after their refusal to hand back the unmanned spyplane that crashed in November.

During a White House news conference with Iraqi Prime Minister Nouri al-Maliki, Mr Obama said: ‘We have asked for it back. We’ll see how the Iranians respond.’

But Mr Cheney told CNN: ‘The right response would have been to go in immediately after it had gone down and destroy it.

• Four mile-wide Strait of Hormuz is world’s most important oil route
• Iranian naval official says shutting tankers out of Strait would be ‘easier than drinking a glass of water’
• 
  
• Threat could push up the price of oil as Iran is world’s 4th-largest producer
• UN report in November claimed Iran is designing an atomic bomb
• Sale of U.S. jets to Saudi Arabia is designed to balance Iran’s influence

Kim Jong-un Hailed as 'Supreme Commander'

World News: Iran Closing Strait of Hormuz

China-Japan pact to sideline dollar

Tue Dec 27, 2  

 

Japan's Prime Minister Yoshihiko Noda (R) reviews an honor guard with China's Premier Wen Jiabao during a welcoming ceremony in Beijing on December. 25, 2011.

Chinese Prime Minister Wen Jiabao and his Japanese counterpart Yoshihiko Noda have reached an agreement to promote direct use of their currencies in bilateral trade, limiting the use of dollar in Asia.

The announcement was made in a statement by the Japanese government on Monday after the Asian leaders met in China's capital Beijing. 

Both sides also agreed that Japan will hold Chinese currency, yuan, in its foreign-exchange reserves, now largely denominated in dollars. 

Chinese Foreign Ministry spokesman Hong Lei said after the meeting that the agreement “benefits the ease of trade and investments between the two countries.” 

“It strengthens the region's ability to protect against risks and deal with challenges,” Lei added. 

The direct currency swap between the world's second- and third-largest economies reflects efforts to reduce risks stemming from fluctuations of foreign exchange rates and transaction costs. 

"As implications from the current global financial crisis continue to spread and the complexity and severity of the world and regional situations are worse than expected, it is necessary and possible that China and Japan join efforts to address the challenges and deepen strategic reciprocal ties," the Chinese premier said. 

China is Japan's biggest trading partner, with transactions between the two amounting to $340 billion in 2010, from $120 billion a decade earlier. 

China also forged a deal with Thailand for a direct currency swap worth $11 billion last week as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asian Nations and establish free trade zones. 

MN/MA 

Iran Threatens to Block Oil Shipments, as U.S. Prepares Sanctions

By DAVID E. SANGER and ANNIE LOWREY

Published: December 27, 2011

WASHINGTON — A senior Iranian official on Tuesday delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply.

The declaration by Iran’s first vice president, Mohammad-Reza Rahimi, came as President Obamaprepares to sign legislation that, if fully implemented, could substantially reduce Iran’s oil revenue in a bid to deter it from pursuing a nuclear weaponsprogram.

Prior to the latest move, the administration had been laying the groundwork to attempt to cut off Iran from global energy markets without raising the price of gasoline or alienating some of Washington’s closest allies.

Apparently fearful of the expanded sanctions’ possible impact on the already-stressed economy of Iran, the world’s third-largest energy exporter, Mr. Rahimi said, “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” according to Iran’s official news agency. Iran just began a 10-day naval exercise in the area.

In recent interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event of a crisis. In Hawaii, where President Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat to close the strait. That seemed in keeping with what administration officials say has been an effort to lower the level of angry exchanges, partly to avoid giving the Iranian government the satisfaction of a response and partly to avoid spooking financial markets.   

But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response. Some administration officials believe that a plot to assassinate the Saudi ambassador to the United States — which Washington alleges received funding from the Quds Force, part of the Iranian Revolutionary Guards Corps — was in response to American and other international sanctions.

Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.

Oil prices rose above $100 a barrel in trading after the threat was issued, though it was unclear how much that could be attributed to investors’ concern that confrontation in the Persian Gulf could disrupt oil flows.

The new punitive measures, part of a bill financing the military, would significantly escalate American sanctions against Iran. They come just a month and a half after the International Atomic Energy Agency published a report that for the first time laid out its evidence that Iran may be secretly working to design a nuclear warhead, despite the country’s repeated denials.

In the wake of the I.A.E.A. report and a November attack on the British Embassy in Tehran, the European Union is also contemplating strict new sanctions, such as an embargo on Iranian oil.

For five years, the United States has implemented increasingly severe sanctions in an attempt to force Iran’s leaders to reconsider the suspected nuclear weapons program, and answer a growing list of questions from the I.A.E.A. But it has deliberately stopped short of targeting oil exports, which finance as much as half of Iran’s budget.

Now, with its hand forced by Congress, the administration is preparing to take that final step, penalizing foreign corporations that do business with Iran’s central bank, which collects payment for most of the country’s energy exports.

The sanction would effectively make it difficult for those who do business with Iran’s central bank to also conduct financial transactions with the United States. The step was so severe that one of President Obama’s top national security aides said two months ago that it was “a last resort.” The administration raced to put some loopholes in the final legislation so that it could reduce the impact on close allies who have signed on to pressuring Iran.

The legislation allows President Obama to waive sanctions if they cause the price of oil to rise or threaten national security.

Still, the new sanctions raise crucial economic, diplomatic, and security questions. Mr. Obama, his aides acknowledge, has no interest in seeing energy prices rise significantly at a moment of national economic weakness or as he intensifies his bid for re-election — a vulnerability the Iranians fully understand. So the administration has to defy, or at least carefully calibrate, the laws of supply and demand, bringing to market new sources of oil to ensure that global prices do not rise sharply.

 “I don’t think anybody thinks we can contravene the laws of supply and demand any more than we can contravene the laws of gravity,” said David S. Cohen, who, as treasury under secretary for terrorism and financial intelligence, oversees the administration of the sanctions. But, he said, “We have flexibility here, and I think we have a pretty good opportunity to dial this in just the right way that it does end up putting significant pressure on Iran.”

The American effort, as described by Mr. Cohen and others, is more subtle than simply cutting off Iran’s ability to export oil, a step that would immediately send the price of gasoline, heating fuel, and other petroleum products skyward. That would “mean that Iran would, in fact, have more money to fuel its nuclear ambitions, not less,” Wendy R. Sherman, the newly installed under secretary of state for political affairs, warned the Senate Foreign Relations Committee earlier this month.

Instead, the administration’s aim is to reduce Iran’s oil revenue by diminishing the volume of sales and forcing Iran to give its customers a discount on the price of crude.

Some economists question whether reducing Iran’s oil exports without moving the price of oil is feasible, even if the market is given signals about alternative supplies. Already, analysts at investment banks are warning of the possibility of rising gasoline prices in 2012, due to the new sanctions by the United States as well as complementary sanctions under consideration by the European Union.

Since President Obama’s first months in office, his aides have been talking to Saudi Arabia and other oil suppliers about increasing their production, and about guaranteeing sales to countries like China, which is among Iran’s biggest customers. But it is unclear that the Saudis can fill in the gap left by Iran, even with the help of Libyan oil that is coming back on the market. The United States is also looking to countries like Iraq and Angola to increase production.

Daniel Yergin, whose new book, “The Quest,” describes the oil politics of dealing with states like Iran, noted in an interview that “given the relative tightness of the market, it will require careful construction of the sanctions combined with vigorous efforts to bring alternative supplies into the market.” He said that it would “add a whole new dimension to the debate over the Keystone XL pipeline,” the oil pipeline from Canada to the United States that the administration has sought to delay.

“The only strategy that is going to work here is one where you get the cooperation of oil buyers,” said Michael Singh, managing director of the Washington Institute for Near East Policy. “You could imagine the Europeans, the Japanese, and the South Koreans cooperating, and then China would suck up all of the oil that was initially going to everyone else.”

A broader question is whether the sanctions — even if successful at lowering Iran’s oil revenue — would force the government to give up its nuclear ambitions.

One measure of the effects, however, is that the Iranian leadership is clearly concerned. Already the Iranian currency is plummeting in value against the dollar, and there are rumors of bank runs.

“Iran’s economic problems seem to be mounting and the whole economy is in a state of suspended expectation,” said Abbas Milani, director of Iranian studies at Stanford University. “The regime keeps repeating that they’re not going to be impacted by the sanctions. That they have more money than they know what to do with. The lady doth protest too much.”

US’ Fifth Fleet threatens Iran over Strait of Hormuz

Tensions between the US and Iran have all but reached a breaking point with a naval standoff moments away from occurring in the Strait of Hormuz.

Following rumors of a budding nuclear program in the works from Tehran,American authorities attempted to infiltrate Iran, most notable with a filed stealth surveillance mission that ended with a US spy drone being downed, recovered and decoded by overseas authorities. After Iran mocked Americafor the country’s inability to manage and command their own aircraft, theEuropean Union fired back in recent days by threatening sanctions against Iran. In response, overseas authorities say that they would respond by shutting down the Strait of Hormuz, a notable channel in the Persian Gulf that serves as a key component in Iran’s oil export exhibitions.

 America who has made it no secret that she’s a fan of oil, says it won’t let Iran get away with shutting down the strait — and the US has thousands of marines on the ready to back up its bark.

While tensions between the two countries have been tight for years, the standoff on the brink of battle could finally bring both nations to loggerheads as word of an all-out war between the two countries has continuously been rumored.

“Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations: any disruption will not be tolerated,” US Fifth Fleet spokeswoman Lt Rebecca Rebarich tells the Associated Press. At its narrowest point, the strait is barely 30 miles wide and is bordered by Iran to the north and the United Arab Emirates to the South. Even if its thousands of miles away from America, Lt Rebarich adds that the US Navy is “…always ready to counter malevolent actions to ensure freedom of navigation.”

In recent weeks, the US has increased military presence in the vicinity of Iran, allegedly installing troops in Pakistan and Afghanistan and arming the UAE with weaponry that could crush any barracks or nuclear facilities across the strait. The mobilization of the Fifth Fleet adds to that arsenal already on the ready an army of more than 15,000 men on over 20 ships and aircraft.

Iran warns that it shut down the strait in a heartbeat, however. “Closing the Strait of Hormuz for Iran’sarmed forces is really easy … or as Iranians say, it will be easier than drinking a glass of water,” Iran’s navy chief Habibollah Sayyari tells the state’s Press TV this week. In the meantime, Sayyari says “we don’t need to shut it,” but could be waiting for America to make the next move.

China Nation urged to increase holdings of gold

chinadaily.com
DECEMBER 27, 2011

BEIJING - China should further diversify its foreign-exchange portfolio and make more gold purchases when the metal's price dips but is still at a relatively high level, a senior central bank official said on Monday.

"The Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimize its foreign-exchange portfolio and purchase gold assets when the gold price shows a favorable fluctuation," said Zhang Jianhua, director of the research bureau affiliated with the People's Bank of China (PBOC).

He made the remarks in an article in the Beijing-based Financial News, a newspaper run by the PBOC.

The spot gold price declined 16 percent over the past three months to less than $1,600 an ounce last week. It touched a record of more than $1,900 in early September.

Zhang said bleak economic conditions, increasing international liquidity as countries turned to monetary easing and the resulting high inflation had dampened investors' confidence. He said that gold had become the only "safe haven" for risk-averse investors. "No asset is safe now. The only choice to hedge risks is to hold hard currency - gold."

Zhang didn't specify what proportion of China's $3.2 trillion foreign reserves should be held in gold.

China is the largest foreign holder of US Treasury securities, having invested about one-third of its foreign reserves in those bonds. About 20 percent has been invested in euro-denominated assets.

As of this month, China ranked sixth worldwide in gold holdings, with about 1,054 tons. The value accounted for about 1.8 percent of the country's total foreign reserves, according to a report released by the World Gold Council (WGC).

The US topped the list by holding more than 8,133 tons of the metal, 76.6 percent of its foreign reserves by value, while Germany ranked second by holding 3,396 tons, 73.7 percent of its reserves.

In 2011, countries including Russia, Thailand, South Korea, Bolivia, Colombia, Kazakhstan and Venezuela purchased the metal to increase gold holdings of their central banks' reserves.

China didn't sell or buy gold from 2010 to 2011, according to WGC statistics.

"The PBOC may have realized that its euro-denominated assets are in greater danger than it expected and started to eye gold," said Li Jie, director of the foreign-reserves research center at the Central University of Finance and Economics.

"But it's impractical for China to put its foreign reserves into commodities, including gold, because all these markets are too small for such a big hoard.

"For example, China's purchasing gold would push up the price of the metal and increase its own cost," said Li.

Li added that there was no easy way for China to get as much gold as it wished because major economies such as the US hold the majority of gold and market supplies are very limited.

China produced 31.75 tons of gold in October, the Ministry of Industry and Information Technology said on Monday. Gold production gained 5 percent in the first 10 months of this year to 290.752 tons.

Driven by increasing demand from risk-averse investors, the international price of gold repeatedly reached new highs in 2011.

Central banks made their biggest gold purchases for a single year in 2011 since the Bretton Woods system dissolved in 1973 and major currencies began to float against each other without being pegged to gold. China has vowed to further diversify the nation's foreign-reserve portfolio amid growing global financial uncertainty. In October, it cut holdings of US Treasury securities by $14.2 billion to $1.13 trillion, the lowest level this year.

Media reports have said that the PBOC plans to create a fund worth $300 billion to invest the country's foreign reserves in the US and European markets. The fund will reportedly seek to invest in real assets and company shares, rather than government securities.

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Iran ready to clone US drone

Iran is set to produce its own drones modeled on a US spy craft intercepted over its territory. Experts are at the final stages of decoding the US RQ-170 Sentinel drone and are to copy it using reverse engineeringtechnology.

Iranian lawmaker Parviz Sorouri, a member of parliament’s national security and foreign policy committee, said the country has the capability to reproduce the drone, Iranian TV reports.

If Iran successfully reverse-engineers the drone it will get access to high-tech secrets such as the chemical composition of the device’s radar-deflecting paint or its sophisticated optics.

Also, if the experts are able to hack the drone’s database, they might recover data the US would not want revealed. However, such drones usually do not store much data and if they do, it is encrypted.

Sorouri said that the information from the seized drone would be used to file a law suit against the US for the “invasion” by the unmanned aircraft.

On December 4, the Iranian military reported they had shot down a US reconnaissance drone aircraft in eastern Iran after a border incursion.

The US first denied the report, but then admitted that they had lost a connection with one of its drone aircraft in the region.

Although Washington claimed the drone had crashed and was beyond repair, citing satellite imagery, Tehran asserted that the craft was in perfect shape. Iranian TV even broadcast footage of the drone on Thursday.

The craft was identified as an RQ-170 Sentinel drone, a model which the US Air Force have been operating for years. While the USAF have not revealed the design or capabilities of this model, many believe it to be a stealth aircraft possessing surveillance technologies.

Later, Iran announced it was not going to return the aircraft, which it claims belongs to the CIA. Iran has also addressed the United Nations, asking it to condemn the US incursion into Iranian airspace, calling it a “hostile act