China defies U.S. pressure as EU parts ways with Iranian oil

A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf, Iran, July 25, 2005. REUTERS/Raheb Homavandi/File Photo

By Chen Aizhu and Florence Tan

BEIJING/SINGAPORE (Reuters) – China, seeking to skirt U.S. sanctions, will use oil tankers from Iran for its purchases of that country’s crude, throwing Tehran a lifeline while European companies such as France’s Total are walking away due to fear of reprisals from Washington.

The United States is trying to halt Iranian oil exports in an effort to force Tehran to negotiate a new nuclear agreement and to curb its influence in the Middle East.

China, which has cut imports of U.S. crude amid a trade war with Washington, has said it opposes unilateral sanctions and defended its commercial ties with Iran.

On Monday, sources told Reuters Chinese buyers of Iranian oil were beginning to shift their cargoes to vessels owned by National Iranian Tanker Co (NITC) for nearly all their imports.

The shift demonstrates that China, Iran’s biggest oil customer, wants to keep buying Iranian crude despite the sanctions, which were reimposed after the United States withdrew in May from a 2015 agreement to halt Iran’s nuclear program.

“The shift started very recently, and it was almost a simultaneous call from both sides,” said one source, a senior Beijing-based oil executive, who asked not to be identified as he is not allowed to speak publicly about commercial deals.

Tehran used a similar system between 2012 and 2016 to circumvent Western-led sanctions, which had curtailed exports by making it virtually impossible to obtain shipping insurance for business with Iran.

Iran, OPEC’s third-largest oil producer, relies on sales of crude to China, Japan, South Korea, India and the EU to generate the lion’s share of budget revenues and keep its economy afloat.

The United States has asked buyers of Iranian oil to cut imports from November. Japan, South Korea, India and most European countries have already slashed operations.

French oil major Total, previously one of the biggest European buyers of Iranian oil, has said it had no choice but to halt imports and abandon Iranian projects to safeguard its operations in the United States.

On Monday, Iranian Oil Minister Bijan Zanganeh said Total had officially left Iran’s South Pars gas project.

Total later confirmed it had notified the Iranian authorities of its withdrawal from South Pars after it failed to obtain a waiver from U.S. sanctions.

Iranian officials had earlier suggested China’s state-owned CNPC could take over Total’s stake and Zanganeh said the process to replace the French company was under way.

“As for the future of Total’s share, we have not been informed of an official CNPC position, but as we have always said, CNPC, a Chinese state-owned company, has the right to resume our participation if it decides so,” Total said in an emailed statement.

WALK AWAY

French President Emmanuel Macron has repeatedly called for safeguarding the Iranian nuclear deal and defended the interests of EU companies in Iran.

But most European companies have conceded that they would be forced to walk away from Tehran for fear of sanctions and losing access to operations that require U.S. dollars.

The first round of U.S. sanctions, which included cutting off Iran and any businesses that trade with it from the U.S. financial system, went into effect on Aug. 7.

A ban on Iranian oil purchases will start in November. Insurers, which are mainly U.S.- or European-based, have begun winding down their Iranian business to comply with the sanctions.

To safeguard their supplies, state oil trader Zhuhai Zhenrong Corp and Sinopec Group, Asia’s biggest refiner, have activated a clause in long-term supply agreements with National Iranian Oil Corp (NIOC) that allows them to use NITC-operated tankers, four sources with direct knowledge of the matter said.

The price for oil under the long-term deals has been changed to a delivered ex-ship basis from the previous free-on-board terms, meaning Iran will cover all costs and risks of delivering the crude as well as handling the insurance, they said.

In July, all 17 tankers chartered to carry oil from Iran to China were operated by NITC, according to shipping data on Thomson Reuters Eikon. In June, eight of 19 vessels chartered were Chinese-operated.

Last month, those tankers loaded about 23.8 million barrels of crude oil and condensate destined for China, or about 767,000 barrels per day (bpd). In June, the loadings were 19.8 million barrels, or 660,000 bpd.

In 2017, China imported an average of 623,000 bpd, according to customs data.

Sinopec declined to comment. A spokesperson for Nam Kwong Group, the parent of Zhenrong, declined to comment.

NIOC did not respond to an email seeking comment. An NITC spokesman said it would forward a request from Reuters for a comment to the country’s Ministry of Culture and Islamic Guidance.

It was not immediately clear how Iran would provide insurance for the Chinese oil purchases, worth some $1.5 billion a month. Insurance usually includes cover for the oil cargoes, third-party liability, and pollution.

(Additional reporting by Parisa Hafezi in Ankara and Cyril Altmeyer in Paris; Writing by Dmitry Zhdannikov; Editing by Dale Hudson)

U.S. revives sanctions to further damage Iran’s economy

FILE PHOTO: A man walks past an anti-U.S. mural in Tehran, Iran October 13, 2017. Nazanin Tabatabaee Yazdi/TIMA via REUTERS

By Lesley Wroughton

WASHINGTON (Reuters) – The Trump administration expects economic sanctions that it is re-imposing on Iran this week to further cripple the Iranian economy and will aggressively enforce the measures, senior U.S. administration officials said on Monday.

The so-called snapback sanctions, due to come into force early on Tuesday, would target Iranian purchases of U.S. dollars, metals trading and other dealings, coal, industrial-related software and its auto sector.

Iran’s rial currency has lost half its value since April under the threat of revived U.S. sanctions. The plunge in the currency and soaring inflation have sparked sporadic demonstrations in Iran against profiteering and corruption, with many protesters chanting anti-government slogans.

President Donald Trump is aiming to cut off the Iranian leadership’s access to resources, the officials said. The United States also plans to re-introduce potentially more damaging sanctions on Iranian oil in November.

But the U.S. sanctions strategy has several weak spots, especially a reluctance by Europe and China to curtail business with Iran.

The European Union voiced regret on Monday at the looming U.S. sanctions.

Trump warned on Monday of “severe consequences” for people or entities that fail to wind down economic activities with Iran.

“The United States is fully committed to enforcing all of our sanctions, and we will work closely with nations conducting business with Iran to ensure complete compliance,” he said in a statement.

If Iran wants to avoid the reimposition of sanctions it should take up Trump’s offer to negotiate, White House national security adviser John Bolton said on Monday.

Asked on Fox News what Iran’s leaders could do, Bolton said: “They could take up the president’s offer to negotiate with them, to give up their ballistic missile and nuclear weapons programs fully and really verifiably not under the onerous terms of the Iran nuclear deal, which really are not satisfactory.”

“If Iran were really serious they’d come to the table. We’ll find out whether they are or not.”

The sanctions now being brought back were among those lifted under the 2015 deal between world powers and Tehran on curbing Iran’s nuclear program.

Foes for decades, the United States and Iran have been increasingly at odds over Iran’s growing political and military influence in the Middle East since Trump took office in January 2017.

Trump announced this May he would withdraw the United States from the Iran nuclear deal.

Iranian Foreign Minister Mohammad Javad Zarif said on Monday that Trump and U.S. allies Israel and Saudi Arabia have become isolated by their hostile policies toward Tehran, state TV reported.

“Their oppressive policies and violent measures have made them isolated … The world has distanced itself from their hostile policies against Iran,” Zarif was quoted as saying.

The sanctions aim to modify Iran’s behavior and not bring about a “regime change” targeting President Hassan Rouhani, the U.S. officials said. They said the Iranian government’s handling of social and labor protests was a concern.

EUROPE WORRIED

The European Union expressed concern at the new U.S. move.

“We deeply regret the re-imposition of sanctions by the U.S.,” the bloc said in a joint statement with the foreign ministers of France, Germany, and Britain.

One EU measure to mitigate the impact of U.S. sanctions, known as the blocking statute, will come into force on Tuesday.

One U.S. official said the administration was deeply concerned about reports of Iran’s violence against unarmed citizens. “The United States supports the Iranian people’s right to peacefully protest against corruption and oppression without fear of reprisal,” the official added.

The U.S. officials added that Trump was ready to meet with Iran’s leaders at any time to try to forge a new agreement.

Trump “will meet with the Iranian leadership at any time to discuss a real comprehensive deal that will contain their regional ambitions, will end their malign behavior and deny them any path to a nuclear weapon,” one official said.

Asked about possible exemptions to the sanctions, officials said they would examine any requests on a case-by-case basis.

(Reporting by Lesley Wroughton and Lisa Lambert in Washington and Robert-Jan Bartunek and Alissa de Carbonnel in Brussels; Writing by Alistair Bell; Editing by Howard Goller and James Dalgleish)

Iran naval drills underway amid tensions with U.S.

A staff member removes the Iranian flag from the stage after a group picture with foreign ministers and representatives of the U.S., Iran, China, Russia, Britain, Germany, France and the European Union during the Iran nuclear talks at the Vienna International Center in Vienna, Austria July 14, 2015. To match Analysis USA-ELECTION/IRAN

By Phil Stewart

WASHINGTON (Reuters) – The United States believes Iran has started carrying out naval exercises in the Gulf, apparently moving up the timing of annual drills amid heightened tensions with Washington, U.S. officials told Reuters on Thursday.

One U.S. official, speaking on condition of anonymity, said possibly more than 100 vessels were involved in the drills, including small boats. A second official expected the drill could be wrapped up this week.

Iran has been furious over U.S. President Donald Trump’s decision to pull out of an international nuclear deal and reimpose sanctions on Tehran. Senior Iranian officials have warned the country would not easily yield to a renewed U.S. campaign to strangle Iran’s vital oil exports.

The U.S. military’s Central Command on Wednesday confirmed it has seen an increase in Iranian naval activity, including in the Strait of Hormuz, a strategic waterway for oil shipments that Iran’s Revolutionary Guards have threatened to block.

“We are monitoring it closely, and will continue to work with our partners to ensure freedom of navigation and free flow of commerce in international waterways,” said Navy Captain Bill Urban, the chief spokesman at Central Command, which oversees U.S. forces in the Middle East.

Central Command did not update its guidance on Thursday.

A third official said the Iranian naval operations did not appear to be affecting commercial maritime activity.

U.S. officials, speaking to Reuters on condition of anonymity, said the drills appeared designed to send a message to Washington, which is intensifying its economic and diplomatic pressure on Tehran but so far stopping short of using the U.S. military to more aggressively counter Iran and its proxies.

But Iran did not appear interested in drawing attention to them. Iranian authorities have yet to comment on them and several officials contacted by Reuters declined to comment.

Trump’s policies are already putting significant pressure on the Iranian economy, although U.S. intelligence suggests they may ultimately rally Iranians against the United States and strengthen Iran’s hardline rulers, officials say.

Iran’s currency plumbed new depths this week ahead of Aug. 7, when Washington is due to reimpose a first lot of sanctions following Trump’s withdrawal from the 2015 nuclear deal.

Protests have broken out in Iran since the beginning of the year over high prices, water shortage, power cuts and alleged corruption.

On Tuesday, hundreds of people rallied in cities including Isfahan, Karaj, Shiraz and Ahvaz to protest high inflation caused in part by the weak rial.

(Reporting by Phil Stewart in Washington; additional reporting by Parisa Hafezi in Ankara; Editing by James Dalgleish)

Israel says it killed seven insurgents on Syria frontier, talks up Assad

FILE PHOTO: Israeli Defense Minister Avigdor Lieberman visits Gaza's Kerem Shalom crossing, the strip's main commercial border terminal, July 22, 2018. REUTERS/Amir Cohen/File Photo

By Dan Williams

JERUSALEM (Reuters) – Israel said on Thursday it saw potentially stabilizing benefits to President Bashar al-Assad winning the Syrian civil war after the Israeli military said it killed seven Islamist insurgents in a rare airstrike across the countries’ frontier.

The remarks by Israel’s defense minister signal an emerging Israeli accommodation with Assad, an old enemy who has not sought direct confrontation with Israel, as he regains control of Syria from rebels – including some Islamist groups.

As recently as last week, Israel sounded alarms over Assad’s advances against southwestern rebels: It shot down a Syrian warplane that it said had strayed into the Israeli-occupied Golan Heights and warned Assad’s Iranian and Lebanese Hezbollah reinforcement against trying to deploy on the Syrian-held side.

But Defence Minister Avigdor Lieberman struck a cautiously upbeat note on Thursday as he described an Assad win as a given.

“From our perspective, the situation is returning to how it was before the civil war, meaning there is a real address, someone responsible, and central rule,” Lieberman told reporters during a tour of air defense units in northern Israel.

Asked whether Israel should be less wary of possible flare-ups on the Golan – much of which it seized from Syria in a 1967 war and annexed in a move not recognized abroad – Lieberman said: “I believe so. I think this is also in Assad’s interest.”

Shortly after the remarks, Israel’s military said it had carried out an air strike on the Golan on Wednesday night, killing seven insurgents that it believed were from a Syrian wing of Islamic State and en route to attack an Israeli target.

With Assad’s troops closing in, “we see how the ISIS-affiliated terrorists are scattered and are losing terrain,” military spokesman Lieutenant-Colonel Jonathan Conricus said.

He said the men hit had assault rifles and bomb belts and moved in a battle formation: “We assume they were on a terrorist mission and that they were trying to infiltrate into Israel. It did not seem as if they were fleeing, seeking refuge.”

An earlier Israeli military statement said the airstrike took place on the Syrian-held Golan. But Conricus amended that, saying that the location was within Israeli lines.

There was no immediate Syrian government response.

The Syrian Observatory for Human Rights, a Britain-based war monitoring group, on Thursday, reported clashes going on between Assad’s forces and Islamic State militants on the Syrian Golan.

The Syrian civil war erupted in 2011 and Russian intervention in 2015 helped to turn the tide in Assad’s favor.

Russian military police began deploying on the Syrian-held Golan and planned to set up eight observation posts in the area, the Defence Ministry in Moscow said, describing the move as aimed at supporting a decades-old U.N. peacekeeper presence.

The new Russian posts would be handed over to the Syrian government once the situation stabilized, the ministry said.

Conricus confirmed the Russian deployment but declined to comment further.

Lieberman said that, for there to be long-term quiet between Israel and Syria, Assad must abide by a 1974 U.N.-monitored armistice that set up demilitarized zones on the Golan.

Lieberman reiterated Israel’s demand that Iran not set up military bases against it in Syria, nor that Syria be used to smuggle arms to Hezbollah guerrillas in neighboring Lebanon.

“We are not looking for friction, but we will know how to respond to any provocation and any challenge,” he said.

(Additional reporting by Angus McDowall in Beirut and Tom Balmforth in Moscow; Editing by Kevin Liffey and David Stamp)

Syrian rebels and Iran reach deal to evacuate villages: sources

FILE PHOTO - People that were evacuated from the two villages of Kefraya and al-Foua walk near buses, after a stall in an agreement between rebels and Syria's army, at insurgent-held al-Rashideen, Aleppo province, Syria April 15, 2017. REUTERS/Ammar Abdullah

By Suleiman Al-Khalidi

AMMAN (Reuters) – Syrian rebels and Iranian-backed negotiators have reached a deal to evacuate thousands of people from two rebel-besieged Shi’ite villages in northwest Syria in return for the release of hundreds of detainees in state prisons, opposition sources said.

They said the negotiators from Hayat Tahrir al-Sham, a rebel coalition spearheaded by Syria’s former al Qaeda offshoot Nusra Front, and Iran’s Revolutionary Guards had reached the secret deal, under which all residents would be evacuated from the mostly Shi’ite villages of al-Foua and Kefraya in Idlib province.

“An initial agreement has been reached but talks are ongoing,” said an Islamist rebel source familiar with the secret negotiations that Turkey was also involved in and which builds on a deal reached last year that was never fully implemented.

In April 2017 thousands of people in the two Shi’ite towns were evacuated to government-held areas in a swap deal that in exchange freed hundreds of Sunnis living in former rebel-held Madaya and Zabadani that were then besieged by Lebanon’s Iranian-backed Hezbollah group.

But the evacuation of the remaining 7,000 people in al-Foua and Kefraya in exchange for the release of 1,500 detainees prisoners never went through.

The resumption of talks now to complete the deal was to ward off a possible military campaign by the Syrian army and Iranian backed militias to end the siege of the two Shi’ite towns, another opposition source said.

“Over 1,500 civilian and rebel prisoners held in regime prisons will be released,” said an opposition source familiar with the talks told Reuters.

The deal also includes release of thirty four prisoners captured by Hezbollah during its siege of the Madaya and Zabadani.

There was no official word on the deal but state-owned Ikhabriyah television station said there were “reports of an agreement to liberate thousands from the two towns”.

Iran, which backs President Bashar al Assad against the mainly Sunni insurgents and has expanded its military role in the country, has long taken a interest in the fate of its co-religionists in the two-besieged towns.

It has arranged dozens of air lifts of food and equipment to circumvent the siege by rebels of the two towns.

Past deals have mostly affected Sunni Muslims living in former rebel-held areas surrounded by government forces and their allies after years of crushing sieges that have in some cases led to starvation. Damascus calls them reconciliation deals.

Rebels say it amounts to forced displacement of Assad’s opponents from Syria’s main urban centers in the west of the country, and engenders demographic change because most of the opposition, and Syria’s population, are Sunni.

But backed militarily by Russia and Shi’ite regional allies, Assad, a member of Syria’s Alawite minority, has negotiated the deals from a position of strength.

(Reporting by Suleiman Al-Khalidi; Editing by Richard Balmforth)

Russia’s Putin meets Iran Supreme Leader’s aide in Moscow: RIA

Russian President Vladimir Putin shakes hands with Ali Akbar Velayati, a top advisor to Iran's Supreme Leader Ayatollah Ali Khamenei, during their meeting at the Novo-Ogaryovo state residence outside Moscow, Russia July 12, 2018. Sputnik/Alexei Druzhinin/Kremlin via REUTERS

MOSCOW (Reuters) – Russian President Vladimir Putin met Ali Akbar Velayati, a top adviser to Iran’s Supreme Leader Ayatollah Ali Khamenei, on Thursday in Moscow, RIA news agency reported, without providing any details.

Velayati hailed Iran’s ties with Russia on Wednesday as “strategic” and said he would deliver messages to Putin from Khamenei and Iran’s President Hassan Rouhani. His visit comes as Iran braces for renewed U.S. economic sanctions.

(Reporting by Maria Kiselyova; Writing by Kevin O’Flynn; Editing by Gareth Jones)

Iran vows to sell as much oil as it can despite U.S. sanctions

FILE PHOTO: Iranian Vice President Eshaq Jahangiri speaks during a news conference in Najaf, south of Baghdad, February 18, 2015. REUTERS/Alaa Al-Marjani/File Photo

LONDON (Reuters) – Iranian vice president Eshaq Jahangiri acknowledged on Tuesday that U.S. sanctions would hurt the economy but promised to “sell as much oil as we can” and protect its banking system.

Jahangiri said Washington was trying to stop Iran’s petrochemical, steel and copper exports, and to disrupt its ports and shipping services. “America seeks to reduce Iran’s oil sales, our vital source of income, to zero,” he said, according to Fars news agency.

President Donald Trump said in May he would pull the United States out of an international nuclear deal with Iran and reimpose U.S. sanctions. Washington later told countries they must stop buying Iranian oil from Nov. 4 or face financial consequences.

Jahangiri said it would be a mistake to think the U.S. “economic war” against Iran will have no impact, but added: “We will make Americans understand this year that they cannot stop Iranian oil sales.”

The U.S. ambassador to Berlin called on the government of Chancellor Angela Merkel to block an Iranian attempt to withdraw large sums of cash from bank accounts in Germany.

Iran’s foreign ministry and the central bank have taken measures to facilitate banking operations despite the U.S. sanctions, Jahangiri said without elaborating.

The Iranian oil ministry said last week that it exported 2.2 million barrels per day of crude oil in June. The figure is not significantly lower than exports of 2.4 million bpd in April and in May.

ECONOMIC WAR

European powers still support the 2015 deal, under which Tehran agreed to limit its nuclear development in exchange for international sanctions relief. They say they will do more to encourage their businesses to remain engaged with Iran, though a number of firms have already said they plan to pull out.

Foreign ministers from the five remaining signatory countries to the nuclear deal — Britain, France, Germany, China and Russia — offered a package of economic measures to Iran on Friday but Tehran said they did not go far enough.

“We think the Europeans will act in a way to meet the Iranian demands, but we should wait and see,” Jahangiri said.

The pressure on Iran came as Washington had launched an “economic war with China and even its allies”, he said, referring to trade tensions between the United States and many of its main trading partners.

Jahangiri also accused Washington of trying to use the economic pressure to provoke street protests in Iran.

A wave of anti-government demonstrations against economic hardship and alleged corruption engulfed cities across the country in late December and early January.

(Reporting by Bozorgmehr Sharafedin; Editing by John Stonestreet, Andrew Heavens and David Stamp)

Assad, aided by Russia, poised to snuff out ‘cradle’ of revolt

FILE PHOTO: A woman holds a Syrian flag in Deraa, Syria, July 4, 2018. REUTERS/Omar Sanadiki/File Photo

By Tom Perry and Suleiman Al-Khalidi

BEIRUT/AMMAN (Reuters) – President Bashar al-Assad is poised to snuff out the Syrian rebellion in the place it first began more than seven years ago, as rebels enter talks with his Russian allies on withdrawing from Deraa city or accepting a return of state authority.

Government forces backed by Russia have seized most of Deraa province in the campaign that got underway last month and on Monday encircled rebel-held parts of Deraa city and seized the entire Jordanian frontier that was once in opposition hands.

Assad, whose control was once reduced to a fraction of Syria, now holds the largest chunk of the country with crucial help from his Russian and Iranian allies.

Deraa was the scene of the first anti-Assad protests that spiraled into a war now estimated to have killed half a million people. The conflict has driven over 11 million people from their homes, with some 5.6 million Syrian refugees in neighboring states alone and many more in Europe.

Rebels in Deraa are due to hold talks with Russian officers on Tuesday, a spokesman for the rebels, Abu Shaimaa, said. The talks were due to take place in the town of Busra al-Sham.

Some are seeking evacuation to opposition-held areas of the north while others are negotiating to remain as a local security force, he said.

“Today there is a session with the Russians over the forced displacement,” he said in a text message, referring to the expected evacuation of a yet-to-determined number of rebels to opposition areas of the northwest at the border with Turkey.

A pro-Syrian government newspaper, al-Watan, said “the coming hours will be decisive on the level of ending the chapter of terrorism in Deraa city”.

As Assad pushes for outright military victory, there seems little hope of a negotiated peace settlement to the conflict.

The north and much of the east however remain outside his control and the presence of U.S. and Turkish forces in those areas will complicate further advances for Damascus.

“EXTREMELY SCARED”

Government forces began thrusting into Deraa province last month. Heavily outgunned rebels surrendered quickly in some places as the United States, which once armed them, told opposition forces not to expect its intervention.

Deraa rebels agreed to a wider ceasefire deal brokered by Russia last Friday and to surrender the province in phases. Syrian and Russian forces then took control of the main crossing with Jordan, which has been in rebel hands since 2015.

On Monday, government forces extended their control all the way along Deraa province’s border with Jordan up to a pocket of territory held by Islamic State-affiliated militants, severing a once vital opposition lifeline to Jordan.

The Syrian Observatory for Human Rights, which monitors the war, said army helicopters dropped leaflets on the rebel-held town of al-Haara saying “there is no place for militants”.

The government offensive is expected to turn next to nearby rebel-held areas of Quneitra province, at the border with the Israeli-occupied Golan Heights.

The offensive has triggered the biggest single displacement of civilians in the war, uprooting more than 320,000 people. Large numbers of people have moved again in the few days since the ceasefire was agreed, some returning to their villages.

Rachel Sider, Syria advocacy and information adviser with the Norwegian Refugee Council, said displaced people had been crossing back to areas that are subject to the agreement “because the expectation is that now there is a ceasefire that is holding, that will be the most stable and safe place”.

“But we also know that people still feel extremely scared. They are not very clear about who is in control of the places that they are from. We have seen a lot of confusion amongst people who are trying to make a decision about their families’ safety and their future,” she said.

Tens of thousands of displaced people are still thought to be sheltering in the Tel Shihab area of Deraa province, and many more are at the frontier with the Israeli-occupied Golan Heights.

(The story corrects to show talks over fate of rebels in Deraa city are being held in Busra al-Sham, not Deraa city itself.)

(Writing by Tom Perry, Editing by William Maclean)

U.S. Navy says will protect commerce in face of Iran oil threat

FILE PHOTO: The Sterett Destroyer escorts the Nimitz-class aircraft carrier USS Abraham Lincoln (CVN 72) during a transit through the Strait of Hormuz, February 14, 2012. REUTERS/Jumana El Heloueh/File Photo

By Bozorgmehr Sharafedin

LONDON (Reuters) – The U.S. Navy stands ready to ensure freedom of navigation and free flow of commerce, a spokesman for the U.S. military’s Central Command said on Thursday, after Iran warned it will block oil shipments through the Strait of Hormuz.

Iran has threatened in recent days to close the strait, a vital route for world oil supplies, if Washington tries to cut Tehran’s exports.

An Iranian Revolutionary Guards commander said on Wednesday Iran would block any exports of crude for the Gulf in retaliation for hostile U.S. action.

“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 Forces reaction if Iran blocks the Strait of Hormuz, he said: “Together, we stand ready to ensure the freedom of navigation and the free flow of commerce wherever international law allows.”

The Islamic Revolutionary Guards Navy (IRGCN) lacks a strong navy and instead focuses on an asymmetric warfare capability in the Gulf. It possesses many speed boats and portable anti-ship missile launchers and can lay naval mines.

A senior U.S. military leader said in 2012 the Guards have the ability to block the Strait of Hormuz “for a period of time” but the United States would take action to reopen it in such an event.

In May, U.S. President Donald Trump pulled out of a multinational 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.

(Reporting by Bozorgmehr Sharafedin; Editing by Matthew Mpoke Bigg)

Iran’s rulers face discontent as U.S. pressure mounts

FILE PHOTO: Iranian President Hassan Rouhani attends a meeting with Muslim leaders and scholars in Hyderabad, India, February 15, 2018. REUTERS/Danish Siddiqui/File Photo

By Parisa Hafezi

ANKARA (Reuters) – Mounting pressure from the Trump administration combined with discontent among many Iranians at the state of the economy are rattling the Islamic Republic, with little sign that its leaders have the answers, officials and analysts say.

Three days of protests broke out on Sunday in Tehran’s Grand Bazaar, with hundreds of angry shopkeepers denouncing a sharp fall in the value of the Iranian currency.

The disturbances are a major challenge, but analysts expect the leadership will survive despite factional infighting and growing economic problems.

However, the weekend protests quickly acquired a political edge, with people shouting slogans against Iran’s ultimate authority, Supreme leader Ayatollah Ali Khamenei, and other top officials, calling them thieves who should step down.

Bazaar merchants, mostly loyal to the leadership since the 1979 Islamic Revolution, are angry at what they see as the government’s muddled response to the crisis, which they said had sent prices soaring and made trading almost impossible.

The rial has lost 40 per cent of its value since last month, when President Donald Trump pulled out of Iran’s 2015 nuclear accord and announced draconian sanctions on Tehran.

These include an attempt to shut down the international sale of Iranian oil, Tehran’s main source of revenue, a threat that has cast a chill over the economy.

“The country is under pressure from inside and outside. But it seems there is no crisis management plan to control the situation,” said an official close to Khamenei’s camp.

The full impact of Trump’s withdrawal from the nuclear deal and Washington’s move to stop foreign countries from doing business with Iran, may not be clear for months.

European signatories are hoping to salvage the deal – under which most sanctions were lifted and Iran curbed its nuclear program – but there are doubts they can keep it alive.

Already French companies Total and Peugeot, for example, have said they will pull out of Iran rather than risk being shut out of the U.S. financial system, as Washington threatens to use the dollar’s reserve currency status to punish anyone who gets in the way of its ramped-up Iran policy.

Iran has blamed U.S. sanctions for the fall in the rial, saying the measures amount to a “political, psychological and economic” war on Tehran – although some officials recognize that the threat has exposed serious failings at home.

“Sanctions cannot be blamed for all the internal problems. They have yet to be implemented,” said a second official, familiar with Iran’s decision-making process.

To pile on the pain, Washington says all countries must end crude imports from Iran by Nov. 4, hitting the oil sales that generate 60 percent of the country’s income. Iran says this level of cuts will never happen.

 

“DEATH TO THE DICTATOR”

Tehran’s Grand bazaar is traditionally the biggest financial ally of the establishment, and it helped bankroll the 1979 Revolution.

But while cries of “Death to the Dictator” resembled chants of “Death to the Shah” four decades ago in the bazaar, analysts and insiders ruled out any chance that Iran is once more on the brink of a seismic shift in its political landscape.

“With severe economic pressure ahead of us, the protests will not die easily,” said an Iranian diplomat in Europe. “But the chance of a regime change is zero because Iranians do not want another revolution and are skeptical it would be for the better.”

Police and security forces maintained a heavy presence in the area after days of clashes with protesters. Though officials say the bazaar has resumed normal business, the rial crisis and its political reverberations are surely far from over.

Video on social media showed protests continuing in several towns and cities, with some participants demanding regime change.

While pragmatist President Hassan Rouhani’s government has tried to stop the currency slide with a combination of threats and persuasion, many Iranians remain unconvinced.

“The rial’s fall is disrupting my business. The cost of imports has skyrocketed. If it continues, I will not be able to continue my business,” said Reza, a shopkeeper in the bazaar who refused to give his full name.

Despite calls for unity by Khamenei, divisions have emerged among Iran’s ruling elite, with some hardliners calling for a snap presidential election, and criticizing Rouhani for economic mismanagement.

Factional power struggles are endemic in Iran, where hardliners around the Supreme Leader, such as the Revolutionary Guards and the judiciary, face off against the president, and pragmatists and reformists in elected institutions such as parliament.

“Both sides will try to use the combination of external and internal pressure to advance their causes,” said Sanam Vakil, an adjunct professor teaching Middle East politics at SAIS Europe.

“If the government fails to find an immediate solution to the crisis … a snap presidential election will be inevitable in the coming months,” said Tehran-based analyst Saeed Leylaz.

AN OUTSIDE CHANCE

Some analysts see an outside chance that Iran’s hardline leaders might seek an accommodation with the United States, with the prospect of sanctions bringing Iran’s economy to its knees.

But Trump may be in no hurry to embark on negotiations that might bolster Iranian clerical leaders.

The leadership “might lean toward a compromise with America to preserve the establishment”, said one official involved in Iran’s nuclear talks with foreign powers. “But of course America should show flexibility as well.”

While more pragmatic elements in Iran have indicated an interest in dialogue with America and a diplomatic solution to the standoff, Khamenei has resisted direct negotiations, partly because of internal power politics.

“Despite their radical public approach, hardliners want a compromise with America, but they don’t want to give Rouhani the upper hand at home by championing talks,” said a source, familiar with Iranian thinking.

(Writing by Parisa Hafezi; Editing by Samia Nakhoul and Giles Elgood)