Wednesday, August 23, 2006


Iran flexes military muscle near Straits of Hormuz

A few hours before Iran delivered its response to the UN regarding its nuclear program, an Iranian warship fired on a Romanian oil rig off the coast of Iran.  Troops from the vessel then boarded and seized it, according to the rig's owner said.

Since this is not getting any significant play in the US yet, here is some other stuff you might like to know. For starters, bloomberg news reports:

The U.A.E.-registered drilling company had signed a preliminary contract with Halliburton Co. after winning an estimated $310 million contract to develop phases 9 and 10 of Iran's offshore South Pars gas reservoir.

Here's the brief version according to the Taipei Times:
Radu Petrescu, spokesman for Grup Servicii Petroliere (Oil Services Group, GSP), said the Iranians first fired into the air and then fired at the Orizont rig. Half an hour later, troops from the ship boarded and occupied the rig, and the company soon lost contact with the 26 crew members, he said.

Gabriel Comanescu, GSP president, said, "They fired on the rig. They destroyed one of the cranes. Four armed soldiers climbed aboard the rig." Realitatea TV reported that 20 Romanian crew members and seven Indians were on the rig. Romania's charge d'affaires in Iran, Mircea Has, said the Romanian crew members were not injured, but that they were being detained on the rig's helicopter pad.

GSP was in Iranian courts earlier this year over a dispute involving another oil rig, Fortuna, the financial weekly Saptamana Financiara has reported. It was unclear whether yesterday's incident was related to legal issues.

Kish is located in the southern Persian Gulf. In this satellite shot, Kish Island is the roundish island just off the south coast of Iran. You can see it is almost in the center of the image. The Straits of Hormuz are the narrow waterway to the right.

Think of it as Iran's Hong Kong.  Since the mid-1990s the Iranian government has been working to develop Kish as a rival to Dubai. This has resulted in massive development designed to attract foreign investment and trade.

Within the area of the Kish Free Zone, as it is known, the standard laws and mores of the Islamic Republic of Iran are far more relaxed than on the mainland, which has enabled rapid and significant increases in the foreign tourist population over the years, as well as in international trade on the island.

Turning that area into a warzone could easily impact traffic of oil from southern Iraq, Kuwait, Saudi Arabia, Qatar, and UAE as Kish is just north of the Straits of Hormuz.   It is worth noting that there is a longstanding dispute between Iran and UAE over ownership of Abu Musa, Greater Tunb Island, and Lesser Tunb Island, all located in the Straits of Hormuz.  In case you are wondering why this is a particularly important stretch of water: One fifth of the world's oil is shipped through the Straits.

With China sitting on a 100 Billion USD deal for oil from Iran, and Russia also standing behind them, I doubt they are going to sit by quietly if the US tries to shake a big stick here.  Back in May, Bloomberg News anticipated an attack by Iran on the Straits in retaliation to any US attack.  I think this may be the opening gambit designed to forestall such an attack.  This did not escape the attention of people reporting on the financial markets.

Storming the Romanian rig ``sends a message that Iran can project its power and could interfere in oil production,'' Heinrich Matthee, Iran analyst for Control Risk Group, said in a phone interview today from London.

Going after a Romanian company's property avoids a direct confrontation with Arab nations while militarizing the area.  Although Romania is a NATO member, this is private property.  However, this adds a potential new spin to the statement by Romania's former oil minister, Mircea Geoana that, "The oil rig Orizont is Romanian territory."

Is it me, or is it hot in here?

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