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Iran warning over US warship raises tensions, oil prices
by Staff Writers
Tehran (AFP) Jan 3, 2012

Oil prices soar on US, Chinese data, Mideast tensions
London (AFP) Jan 3, 2012 - World oil prices soared on Tuesday, underpinned by positive US, Chinese and eurozone economic data and tensions in the Middle East over transit through the Gulf, analysts said.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for delivery in February jumped $3.56 to $102.39 a barrel.

Brent North Sea crude for February rallied $3.64 to $111.02 in late London deals.

"Prices have moved up as the market reacts to the expansion in manufacturing activity in China," said Victor Shum, senior principal at Purvin and Gertz international energy consultants.

"Geopolitical tensions over Iran have also supported the market," he added.

Official data released Sunday showed China's manufacturing activity rebounded in December helped by holiday shopping.

The purchasing managers index (PMI) reached 50.3 in December, the China Federation of Logistics and Purchasing said. A reading above 50 indicates the sector is expanding while a reading below 50 suggests a contraction.

China is the world's largest energy consumer and its economic data, particularly concerning production, strongly influences crude prices.

In US meanwhile, data Tuesday showed the manufacturing sector expanded in December more quickly than expected.

The Institute for Supply Management's manufacturing index hit 53.9, up 1.2 points from November for the fastest rate in six months.

Meanwhile, traders were closely monitoring the situation in the Strait of Hormuz, a vital oil-transit waterway from the Gulf through which 20 percent of the world's oil is transported.

Iran on Monday tested missiles near the strait, highlighting its threats to close the vital passage way as the West readies to impose more economic sanctions over Tehran's nuclear drive.

The United States and its allies have imposed their sanctions to punish Iran for maintaining a nuclear programme they believe masks military objectives, a claim rejected by Tehran.


A threat by Iran to unleash the "full force" of its navy if a US aircraft carrier is redeployed to the Gulf, and an immediate American dismissal of the warning, sent tensions and oil prices soaring on Tuesday.

The unprecedentedly sharp rhetoric raised the possibility of conflict breaking out between arch-foes Tehran and Washington, pitching a long standoff over Iran's nuclear programme into dangerous new territory.

"We don't have the intention of repeating our warning, and we warn only once," Brigadier General Ataollah Salehi, Iran's armed forces chief, said as he told Washington to keep its aircraft carrier out of the Gulf.

The US carrier would face the "full force" of Iran's navy otherwise, a navy spokesman, Commodore Mahmoud Mousavi, told Iran's Arabic television service Al-Alam.

The White House brushed off the warning, with spokesman Jay Carney saying it "reflects the fact that Iran is in a position of weakness" as it struggles under international sanctions.

The US Defence Department said it would not alter its deployment of warships to the Gulf.

"Deployment of US military assets in the Persian Gulf region will continue as it has for decades," it said in a statement.

The developments helped send oil prices soaring more than $3 per barrel, to $102.39 a barrel for West Texas Intermediate crude and $111.02 for Brent North Sea crude.

Iran warning came after it completed 10 days of naval war games by testing three anti-ship missiles. The display of force was meant to show it controlled the strategic Strait of Hormuz, through which 20 percent of the world's oil flows.

Last week, a US aircraft carrier, the USS John C Stennis, passed through the strait and eastward, through the Gulf of Oman and a zone being used by the Iranian navy for its drill.

The nuclear-powered "supercarrier" is one of the US navy's biggest warships. It and its escort destroyers have been deployed in the Gulf for the past few months.

An Iranian military aircraft filmed the US vessel, with its bow number -- CV-74 -- visible, as it brushed past Iran's war games.

"We advise and insist that this warship not return to its former base in the Persian Gulf," Salehi was quoted as saying on the armed forces' official website.

The USS John C. Stennis started its current seven-month deployment at sea in late July 2011, according to US navy websites.

The US Defence Department did not say whether the carrier was meant to travel back into the Gulf before its scheduled return to the United States.

But it said it regularly sent one or more of its 11 aircraft carriers and their accompanying ships on rotation to the Gulf to support military operations in the region.

"Our transits of the Strait of Hormuz continue to be in compliance with international law, which guarantees our vessels the right of transit passage," it said.

The statement also underlined the US pledge to keep the Strait of Hormuz open, saying "we are committed to protecting maritime freedoms that are the basis for global prosperity; this is one of the main reasons our military forces operate in the region."

Pentagon press secretary George Little told reporters, however: "No one in this government seeks confrontation over the Strait of Hormuz. It's important to lower the temperature."

Iran has threatened to close the strait if it comes under attack or if new sanctions hit its oil exports.

At the weekend, US President Barack Obama activated such a sanction, signing into law measures targeting Iran's central bank, which processes most of the Islamic republic's oil sales.

The European Union, which is mulling an embargo on Iranian oil, is expected to announce further sanctions of its own at the end of January.

French Foreign Minister Alain Juppe said Tuesday he wanted to see "stricter sanctions" applied on Iran.

The Western sanctions, which add to four sets of UN sanctions, punish Iran for maintaining nuclear activities that the United States and its allies believe are being used to develop a weapons capability.

The International Atomic Energy Agency published a report in November strongly suggesting Iran was researching nuclear weapons and delivery systems.

Tehran denies the allegations, saying its nuclear programme is exclusively for medical and power generation purposes.

Underlining the progress it is making, Iran's atomic energy organisation said on Sunday its scientists had made the country's first nuclear fuel rod from domestically mined uranium.

The Islamic republic has been responding to the pressure by both threatening a military response and offering to resume negotiations over its nuclear programme that were suspended nearly a year ago.

Iran was waiting for EU foreign policy chief Catherine Ashton to set a date and venue for a meeting to discuss resuming talks that have been stalled for nearly a year, foreign ministry spokesman Ramin Mehmanparast told reporters Tuesday.

But a spokesman for Ashton shot back that Iran "must first respond" to an October letter from Ashton proposing renewed talks, "and then we'll take it from there."

The negotiations were being held with the five permanent members of the UN Security Council -- Britain, China, France, Russia and the United States -- plus non-permanent member Germany.

The international pressure has already hit Iran's economy, scaring off foreign investors and complicating payments for oil exports.

Officials said recent volatility in Iran's currency, the rial, that worsened after the latest US measures were enacted on the weekend, had nothing to do with sanctions.

The Iranian central bank injected foreign currency into the domestic market on Tuesday, reversing much of a 12-percent fall in the rial on Monday, according to Commerce Minister Mehdi Ghazanfari, quoted by the state IRNA news agency.

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US vows to keep warships in Gulf region
Washington (AFP) Jan 3, 2012 - The United States vowed Tuesday to keep American warships deployed in the Gulf region, despite Iran issuing warnings over the Strait of Hormuz.

"The deployment of US military assets in the Persian Gulf region will continue as it has for decades," Pentagon press secretary George Little said in a statement.

The movement of US aircraft carriers and accompanying ships in the Gulf and through the strategic Strait of Hormuz were part of longstanding security commitments, supported US military operations in the region and were in compliance with the laws of the sea, he said.

"Our transits of the Strait of Hormuz continue to be in compliance with international law, which guarantees our vessels the right of transit passage," he said.

"We are committed to protecting maritime freedoms that are the basis for global prosperity; this is one of the main reasons our military forces operate in the region," he said, without referring directly to Iran.

The Pentagon statement came after Tehran's military on Tuesday warned that one of the US Navy's biggest aircraft carriers -- the USS John C. Stennis -- not to return to the Gulf, amid escalating tensions over Tehran's nuclear ambitions.

"We advise and insist that this warship not return to its former base in the Persian Gulf," said Brigadier General Ataollah Salehi, Iran's armed forces chief.

"We don't have the intention of repeating our warning, and we warn only once," he was quoted as saying by the armed forces' official website.

The Stennis, a nuclear-power "supercarrier" that transports up to 90 warplanes and helicopters -- including F/A-18 Hornet fighter jets -- passed through the Strait of Hormuz last Tuesday without incident, according to the US Navy.

The carrier is now in the Arabian Sea where it is providing air power for US-led troops in Afghanistan but defense officials have not said when it might be heading back through the Strait of Hormuz.

Although such missions can last weeks or months, the carrier has been at sea for nearly seven months and it was possible another carrier group might relieve the Stennis.

Iran, which held war games and test-fired missiles near the Strait in recent days, has issued threats and warnings after Western governments backed plans for more punitive sanctions over Tehran's nuclear program.

Iran said it was prepared to close the Strait of Hormuz, a crucial route for global oil shipments, if the West went ahead with the sanctions designed to pile pressure on Tehran over its uranium enrichment work.

At the weekend, US President Barack Obama signed into law new sanctions targeting Iran's central bank, which processes most of the Islamic republic's oil export sales.

The European Union, which is mulling an embargo on Iranian oil, is expected to announce further sanctions of its own at the end of January.



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