The Iranian-Western conflict has many dimensions, including defense and broadening of both sides' interests in the Middle East, as well as the issues of the Iranian nuclear program and the freedom of navigation in the Persian Gulf, especially in what regards the transit of oil tankers in the vital Strait of Hormuz. While this conflict, in its various aspects, has been raging since the Iranian Islamic Revolution in 1980, it has taken on a specific dimension since the IAEA published a report in early November highlighting new information regarding secret progress in the Iranian nuclear weapons program. However, this was strictly denied by Iran, which reiterated that its nuclear program is intended for peaceful purposes only. Whatever the case may be regarding the nature of the Iranian nuclear program, and bearing in mind the fact that the credibility of the U.S. is at stake in the aftermath of the Iraqi scenario and the failure to find nuclear weapons programs in the country despite the occupation, events have been escalating between the West and Iran in the wake of the IAEA report. Another factor that contributed to this escalation is also the approval of U.S. President Barack Obama, on December 31st, of a draft bill in the Congress to boycott international firms that deal with the Iranian Central Bank and Iranian financial institutions. Moreover, the EU countries agreed in principle to adopt similar measures, including a ban on Iranian crude oil imports (Greece, Italy, France and Spain import approximately 800 thousand barrels per day out of the total Iranian crude exports of about 2.5 million barrels per day, while the rest of the exports goes to Asian countries, especially Japan, China, India and South Korea. The United States, meanwhile, has stopped importing Iranian crude since the eighties). The decision to boycott the central bank is in fact a significant escalation against Iran, one that is quite different from previous sanctions, which were limited to blacklisting certain Iranian officials and companies, and banning them from travelling to Western countries or opening bank accounts there. The nuclear issue is at the core of the dispute between the two sides at present. For some time now, Israel has been trying to persuade the United States to carry out a strike against Iran's nuclear facilities, but Washington remains hesitant about this. It is clear that the U.S. does not want to go on another military adventure in the Middle East, especially in such a short space of time after its withdrawal from Iraq and also in an election year. The U.S. is also wary of the Iranian response in the event of an escalation in their conflict. Europe, meanwhile, is undergoing a difficult financial crisis on the back of the sovereign debt problems of certain EU states, and in fact, the fate of the Euro itself will be at stake in 2012. True, the military operation in Libya over the past months succeeded in overthrowing Gaddafi, but it was costly. Yet a military operation in Iran would be much larger in scope, if agreed upon, and will cost much more than the Libyan operation. As is the case in this kind of crises, there are both favorable and unfavorable factors for the two sides to either continue with the status quo or to escalate matters further. In these conditions, it seems that the situation is not conducive to escalation, and to moving statements and diplomatic actions towards a military conflict, and this applies to both sides. Iran knows very well that closing the Strait of Hormuz to oil tankers (which carry around 17 million barrels of oil per day) is tantamount to a declaration of war. Iran also knows that sanctions against its central bank threaten the domestic economy (the exchange rate of Iranian riyal slumped to around 17 thousand riyal against the dollar, compared to 10 thousand riyals before the crisis). This is not to mention the endemic inflation in the country as a result of misguided government policies. These are all factors that weaken support for the regime ahead of the elections scheduled to take place in a few months, especially amid growing voices of dissent. This makes it difficult to fight battles on many internal and external fronts at once. Furthermore, the closure of the Strait of Hormuz will be of no use if it lasted for only a day or two. Rather, it has to be closed for a long period of time, perhaps for several weeks, before the major Western industrialized nations would feel the effects, since they are in possession of strategic and commercial reserves that can last up to one month or two. However, shutting down the Strait for a prolonged period of time will also mean the disruption of Iranian oil exports and imports of foreign goods. Today, a closure of the Strait of Hormuz for a lengthy period of time would give the Western countries, especially the United States that finds itself under pressure from Israel, the opportunity to wage a military campaign. In fact, such a campaign would not only be aimed at reopening the Strait of Hormuz to international shipping, but also to seize the opportunity and strike at the nuclear facilities and the nuclear program, along with Iran's industrial and military bases. Iran is aware that the continuation of the crisis, while only being limited to threats to close the Strait of Hormuz without actually putting this into practice, will lead to higher crude oil prices, and subsequently will slow down the recovery of the European economy. It is worth mentioning that Iran has been threatening to close down the Strait of Hormuz for thirty years without having ever acted on this threat, even during the Iraq-Iran war in the eighties. However, Tehran is also aware that the new embargo against the central bank and the financial institution will weaken its economy, but it seems willing to pay this price at present in order to continue its nuclear program. *. Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
