Iran is flexing its muscles as the U.S. places new sanctions on its Central Bank. Before President Obama signed the 2012 National Defense Authorization Act that included the measure, Iran began a 10-day exercise to showcase its ability to threaten the Strait of Hormuz. Iran later toned down its language but on Sunday, announced it tested its first domestically produced nuclear fuel rod and tested a new medium-range surface-to-air missile.
On Saturday, President Obama signed the NDAA that paves the way for sanctions on foreign businesses dealing with Iran’s Central Bank, potentially dealing a severe blow to the Iranian regime’s vital oil exports. The Iranian currency fell to a new low after it was signed even though it will be 60 days before any sanctions are officially placed and up to six months for the toughest sanctions to be enacted.
President Obama signaled that he would exempt some foreign businesses from punishment. He said that the legislation “would interfere with my constitutional authority to conduct foreign relations” so “should any application of these provisions conflict with my constitutional authorities, I will treat the provisions as nonbinding.” This statement indicates that Obama might protect European, Russian or Chinese companies doing business with Iran if he feels sanctions will have negative diplomatic repercussions. Officials say that the sanctions will be implemented carefully in order to avoid damage to the world economy.
European countries are in talks with the U.S. right now about further sanctions and a possible oil embargo that could prove fatal to the regime. Sixty percent or more of the regime’s budget is derived from oil exports, about 18% of which goes to the European Union. The Iranian regime faces increasing political in-fighting, popular resentment, economic stress and strikes and protests by workers, including in the energy sector. The regime takes the threat of further sanctions seriously, so it threatened to close down the Strait of Hormuz through which 40% of the world’s oil transits. Iran launched military exercises to practice such an operation for 10 days.
Iran’s language softened this weekend. The Revolutionary Guards’ website carried a statement from General Masoud Jazayeri that said, “Discourse about closing the Strait of Hormuz belongs to five years ago. Today’s debate in the Islamic Republic of Iran contains new layers and the time has not come to raise it.” The second sentence leaves open the possibility of an attack in the future. A political official named Ismail Kowsari, on the other hand, said, “If we feel that the enemies want to prevent our oil exports, definitely we will close the Strait of Hormuz.”
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