US-Iran tensions rise over oil route as EU tries to save nuclear deal

REUTERS
LONDON
Published 06.07.2018 20:37

Three European nations as well as Russia and China met Iran in Vienna in a bid to save the nuclear deal, offering the oil producer economic benefits to compensate for the impact of the U.S. sanctions

Three European nations along with Russia and China met with Iran Friday to offer it economic benefits that would lessen the blow of sweeping US sanctions, two months after President Donald Trump walked away from the landmark nuclear deal.

The U.S. Navy stands ready to ensure free navigation and the flow of commerce, the U.S. military's Central Command said on Thursday, as Iran's Revolutionary Guards warned they would block oil shipments through the Strait of Hormuz if necessary.

With tensions rising over the strategic waterway, the European Union is proposing a plan for salvaging a multinational nuclear deal with Tehran after Washington withdrew, but Iranian President Hassan Rouhani told leaders in Paris and Berlin on Thursday that the package did not go far enough.

Rouhani and some senior military commanders have threatened in recent days to disrupt oil shipments from the Gulf countries if Washington tries to strangle Tehran's exports.

Praising Rouhani's "firm stance" against the United States, the head of the Revolutionary Guards said their forces were ready to block the Strait of Hormuz which links the Gulf to the open sea.

In May, U.S. President Donald Trump pulled out of the deal under which sanctions on Iran were lifted in return for curbs to its nuclear program. Washington has since told countries they must stop buying Iranian oil from Nov. 4 or face financial measures.

Mohammad Ali Jafari, who commands the Islamic Revolutionary Guard Corps, Iran's most powerful military force, responded on Thursday.

If Iran cannot sell its oil due to U.S. pressure, then no other regional country will be allowed to do so either, Jafari was quoted as saying by Tasnim news agency. "We are hopeful that this plan expressed by our president will be implemented if needed," he said. "We will make the enemy understand that either all can use the Strait of Hormuz or no one."

The strait is the most important oil transit channel in the world with about one fifth of global oil consumption passing through each day.

"The U.S. and its partners provide, and promote security and stability in the region," Central Command spokesman Navy Captain Bill Urban said in an email to Reuters.

Asked what would be the U.S. naval reaction if Iran blocks the strait, he said: "Together, we stand ready to ensure the freedom of navigation and the free flow of commerce wherever international law allows."

The Guards' naval arm lacks a strong conventional fleet. However, it has many speed boats and portable anti-ship missile launchers, and can lay mines.

A senior U.S. military leader said in 2012 the Guards have the ability to block the strait "for a period of time" but the U.S. would take action to reopen it in such an event.

The EU, once Iran's biggest oil importer, has vowed to keep the 2015 nuclear deal alive without the United States by trying to keep oil and investment flowing. Foreign ministers from the five remaining signatories will discuss the European proposal with Iranian officials in Vienna on Friday.

"The package proposed by Europe for continuation of cooperation in the nuclear deal does not meet all our demands," Rouhani was quoted as saying by his official website. "We expect a clear action plan from Europe with a timetable so it can compensate for the U.S. exit from the deal."

He gave a similar message in a call to German Chancellor Angela Merkel, the president's website reported. The proposed package "only included some general promises like previous EU statements," Rouh

ani said.

Supreme leader Ayatollah Ali Khamenei set out conditions in May for European powers if they want Tehran to stay in the accord, including steps by European banks to safeguard trade with Tehran and guarantees for Iranian oil sales.

Rouhani warned on Wednesday that Iran could reduce its co-operation with the U.N. nuclear watchdog if the deal collapses.

Moreover, Ministers from Britain, China, France, Germany and Russia meet their Iranian counterpart in Vienna for the first time since U.S. President Donald Trump left the pact in May, but diplomats see limited scope for salvaging it.

Speaking on French radio ahead of arriving in the Austrian capital, France's foreign minister said world powers would struggle to put together an economic package immediately.

"They (Iran) must stop threatening to break their commitments to the nuclear deal," Jean-Yves Le Drian said. "We are trying to do it (economic package) before sanctions are imposed at the start of August and then the next set of sanctions in November. For August it seems a bit short, but we are trying to do it by November," he said.

On arrival in Vienna, Germany's Foreign Minister Heiko Mass said he didn't expect a collapse of talks, but suggested more negotiations would be needed in the future. He stressed hat world powers would struggle to compensate Tehran for companies leaving Iran.

The pillars of the European Union's strategy are: European Investment Bank lending, a special measure to shield EU companies from U.S. secondary sanctions, and a Commission proposal that EU governments make direct money transfers to Iran's central bank to avoid U.S. penalties.

Iranian officials have said that key for them is to ensure measures that guarantee oil exports do not halt, and that Tehran still has access to the SWIFT international bank payments messaging system or an alternative.

"We are ready for all possible scenarios ... the collapse of the deal will increase the tension in the region. To save the deal, other signatories should compensate for U.S. sanctions," a senior Iranian official told Reuters on Friday.

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