Iranian threats of closing down the Strait of Hormuz, and of a subsequent interruption of Gulf oil supplies to the global markers, are still reverberating, along with Washington's response that it would not allow this to happen, with U.S. battleships being dispatched to the Gulf in anticipation. However, what is striking in this crisis is that prices have remained stable at the level of 110$ per barrel of Brent crude, despite all these threats. Of course, there is the economic crisis in Europe. Another thing that comes into play is the sanctions imposed on Iranian oil exports, estimated at 2.5 million barrels per day, because of “new information” mentioned in the IAEA's last report on the Iranian nuclear program. These sanctions will be implemented progressively, further protracting the crisis and its repercussions. The sanctions that have been imposed so far have not yet taken their full effect. In addition, the United States does not import Iranian oil, while Europe imports between 400 and 800 thousand barrels per day. Some European countries have thus requested an extension of the importing period until they can secure adequate alternative supplies. In fact, the American law in question allows President Barack Obama to wait a long time before implementing the sanctions, and also gives him the right to completely overlook the sanctions if U.S. supreme interests require it. At present, U.S. diplomacy is attempting to persuade Washington's allies in Asia to reduce their Iranian oil imports. However, these attempts remain mostly unsuccessful, as some major importers of Iranian oil, such as China and India, have decided to stick to their agreements. In Japan, despite the affirmations by the Japanese finance minister at a joint press conference with his American counterpart in Tokyo, that his country will suspend Iranian oil imports, the Japanese Prime Minister reversed this position completely on the next day, when he said that the finance minister's statement reflects his “personal” views, and added that Japan is in the process of consulting with its companies before making any decision in this regard. As regards South Korea, it has issued a long statement about the crisis, but did not address the possibility of suspending its Iranian oil and petrochemical imports what so ever. Nonetheless, a number of countries have begun steps to decrease Iranian oil imports, to the chagrin of Iran, prompting the latter's representative in OPEC, Mohammad Ali Khatibi, to issue an odd and deplorable statement warning Arab Gulf countries of the consequences of compensating Iranian oil exports, in the event of an embargo. This is while the Arab Gulf countries concerned have confirmed that their current policies would remain the same, whereby their clients are provided with the crude oil supplies they require, and their demand for oil is met. In this regard, the Saudi Oil Minister Ali al-Naimi has underscored his country's ability to increase its output to around 11.4-11.7 million barrels per day in a matter of days, and achieve another increase of about 700 thousand barrels per day within three months. This means that Saudi Arabia can increase its actual output by about two million barrels per day in a very short space of time, added to its current output of around 10.5 million barrels per day. Al-Naimi also ruled out the possibility of the Strait of Hormuz being closed for a long time, because of the repercussions on the global economy and the anticipated reactions to such a move. Of course, there is also the spare productive capacity in the UAE and Kuwait and these three countries on their own can make up for the Iranian oil exports, let alone exports from other countries, in case there is demand from consuming countries. Yet, this crisis has many implications for OPEC, whose current session's president is Iraq. Indeed, Iraq would be one of the most affected countries by a closure of the Strait, in the event of which Iraq would lose the ability of ship almost two thirds of its oil exports. In this vain, the former Iraqi Minister of Oil Ibrahim Bahr al-Ulum, at the beginning of last week, wrote in the Iraqi newspaper Al-Muwaten, “OPEC today is facing the biggest challenge in its history, namely the threat of its collapse as an economic organization. At the same time, Iraq is facing the first test of its responsibilities as president of the organization, because of the Iranian threats to close the Strait of Hormuz. The situation is open to all possibilities today, due to the tension that hangs over the region. Despite the fact that such a step would damage both Iran and the region, there is a saying by an Arab poet that, if I die of thirst then I hope it shall never rain after that…Iraq, and not just as a founding member of OPEC, bears today a responsibility that is greater than any time before, to play a pivotal role in preventing the collapse of the organization if Iran carries out its threats, because if this were to happen, it would be a nail in OPEC's coffin”. Soon after these developments, Iraqi Oil Minister Abdul Karim Luaibi expressed his intention to visit Iran to discuss the effects of the crisis with Iranian officials. With regard to OPEC, the Iraqi Minister will no doubt highlight the impending dangers to the Iranian officials, not just as a result of a closure of the Strait, but also because of expectations of a global economic downturn in 2012 as a result of the European economic crisis, shrinking demand for oil and declining prices, at a time when most oil countries have based their budgets for 2012 on oil prices of around 100 dollars per barrel. However, we question the ability of the Iraqi minister to alter the Iranians' standpoint, or even to speak candidly with the Iranians, given the depth of Iranian influence in Iraq. *. Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
