Iran repeats Hormuz threat

Iranian politicians said they expected the European Union to backtrack on its oil embargo and repeated a threat to close the vital Strait of Hormuz shipping lane if the West succeeds in preventing Teheran from exporting crude.

A day after the EU slapped a ban on Iranian oil, Iran's tone appeared defiant, even sceptical, with Teheran insisting that, with the EU faced with its own economic crisis, it needs Iran's oil more than Iran needs its business.

The ban is expected to take full effect within six months.

"The West's ineffective sanctions against the Islamic state are not a threat to us. They are opportunities and have already brought lots of benefits to the country," Intelligence Minister Heydar Moslehi told the official IRNA news agency.

Speaking in London, Saudi Arabia's ambassador to Britain Prince Mohammad Bin Nawaf said the region was witnessing "a very difficult and a very tense situation".

"We are seeing every day an escalation in the rhetoric and this definitely does not help in stabilising the area," he told a briefing.

"I think the next couple of weeks will be very critical for the whole region. Hopefully, Iran will adhere to the proposals presented to them."

He said Iran's threats to block the strait of Hormuz would have grave consequences on the Islamic Republic and the region.

"It will be very difficult to maintain such a blockade against the export of oil but the ramifications of such a decision would be very grave and definitely would escalate the whole situation and God knows where it would lead.

"Definitely the Iranians will pay a very heavy price if they gamble and take such a decision," the Saudi envoy said.

The EU wants to press Iran into curbing its contested nuclear programme and engage in talks with six world powers.

"The global economic situation is not one in which a country can be destroyed by imposing sanctions," Moslehi said.

A spokesman for the oil ministry said Iran had had plenty of time to prepare for the sanctions and would find alternative customers for the 18 percent of its exports that up to now have gone to the 27-nation European bloc.

"The first phase of this (sanctions action) is propaganda, only then it will enter the implementation phase. That is why they put in this six months period, to study the market," Alireza Nikzad Rahbar said, predicting the embargo could be rescinded before it takes force completely.

"This market will harm them because oil is getting more expensive and when oil gets more expensive it will harm the people of Europe," state TV quoted him as saying. "We hope that in these six months they will choose the right path."

The embargo will not kick in completely until July 1 because the bloc's foreign ministers who agreed the ban at a meeting in Brussels were anxious not to penalise the ailing economies of Greece, Italy and others to whom Iran is a major oil supplier.

The strategy will be reviewed in May to see if it should proceed.

Iran, which denies international suspicions that it is trying to design atomic bombs behind the facade of a declared civilian atomic energy programme, has scoffed at efforts to bar its oil exports as Asia lines up to buy what Europe rejects.

Iran's foreign ministry summoned the Danish ambassador on Tuesday to complain about the EU's "illogical decision", accusing Europe of doing the bidding of the United States.

Emad Hosseini, spokesman for parliament's energy committee, said that if Iran encountered any problem selling its oil, it would store it, adding Teheran retained its threat to shut the Gulf to shipping.

The United States, which sailed an aircraft carrier through the strait into the Gulf accompanied by British and French warships on Sunday, has said it would not tolerate the closure of the world's most important oil shipping gateway.

Fitch Ratings issued an assessment of the embargo's market impact saying it would likely cause an oil price increase.

"However, prices may not necessarily increase markedly from current levels as some of the risks related to the EU ban on Iranian oil appear factored in already," it said.

The embargo decision had no discernible impact on oil prices as it was a move that had been flagged well in advance and the threat to close Hormuz seemed remote. Brent crude down slightly at $110 per barrel on Tuesday.

U.S. President Barack Obama said on Monday that the EU sanctions underlined the strength of the international community's commitment to "addressing the serious threat" presented by Iran's nuclear programme.

"The United States will continue to impose new sanctions to increase the pressure on Iran," he said in a statement.

Washington applied its own sanctions to Iran's oil trade and central bank on Dec. 31 and on Monday extended them to the third largest Iranian bank, state-owned Bank Tejarat, and a Belarus-based affiliate for allegedly helping Teheran's nuclear advance.

The EU sanctions were also welcomed by Israel, which has warned it might attack Iran if sanctions do not deflect Teheran from a course that some analysts say could potentially give Iran the means to build a nuclear bomb next year.