|Iran's navy launched a 10-day war game in the Strait of Hormuz on Saturday [Reuters]
No oil will be allowed to pass through the Strait of Hormuz if the West applies sanctions on Iran's oil exports, Iranian Vice-President Mohammad Reza Rahimi has warned.
The threat was reported on Tuesday by the state news agency IRNA as Iran conducted its fourth day of naval drills near the Strait of Hormuz, at the entrance to the oil-rich Gulf.
"If sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz," Rahimi was quoted as saying.
"We have no desire for hostilities or violence ... but the West doesn't want to go back on its plan" to impose sanctions, he said. "The enemies will only drop their plots when we put them back in their place."
The threat underlined Iran's readiness to target the narrow stretch of water along its Gulf coast if it is attacked or economically strangled by Western sanctions.
A spokesperson for the US Navy's 5th fleet responded to the threat by warning Iran that any disruption of traffic flowing though the Strait of Hormuz, "will not be tolerated".
"Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated,'' said Rebecca Rebarich.
She said the US Navy is "`always ready to counter malevolent actions to ensure freedom of navigation.''
More than one-third of the world's tanker-borne oil passes through the Strait of Hormuz. The US maintains a navy presence in the Gulf in large part to ensure that passage remains free.
Tehran in September rejected Washington's call for a military hotline between the capitals to defuse any "miscalculations" that could occur between their military forces in the Gulf.
Iranian ships and aircraft dropped mines in the sea on Tuesday as part of the drill, according to a navy spokesman.
Although Iranian war games occur periodically, the timing of these is seen as a show of strength as the US and Europe prepare to impose further sanctions on Iran's oil and financial sectors.
The last round of sanctions, announced in November, triggered a pro-government protest in front of the British embassy in Tehran during which Basij militia members overran the mission and ransacked it.
London closed the embassy as a result and ordered Iran's mission in Britain shut as well.
An Iranian legislator's comments last week that the navy exercises would block the Strait of Hormuz briefly sent oil prices soaring before that was denied by the government.
While the foreign ministry said such drastic action was "not on the agenda", it reiterated Iran's threat of "reactions" if the current tensions with the West spilled over into open confrontation.
EU ministers said on December 1 that a decision on further sanctions would be taken no later than their January meeting but left open the idea of an embargo on Iranian oil.
Countries in the 27-member EU receive 450,000 barrels per day of Iranian oil, about 18 per cent of the country's exports, much of which go to China and India.
China, the biggest buyer of Iranian crude, has warned against "emotionally charged actions" that might aggravate tension in the nuclear standoff with Iran.
Russia for its part has warned against "cranking up a spiral of tension", saying this would undermine the chances of Iran co-operating with efforts to ensure it does not build atom bombs.
Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq - together with nearly all the liquefied natural gas from lead exporter Qatar - must slip through the 6.4km-wide shipping channel between Oman and Iran.
Some analysts say Iran would think hard about sealing off the Strait since it could suffer just as much economically as Western crude importers.
Saudi steps in
Industry sources said on Tuesday that top oil exporter Saudi Arabia and other Gulf OPEC states were ready to replace Iranian oil if further sanctions halt Iranian crude exports to Europe.
Iranian Oil Minister Rostam Qasemi had said that Saudi Arabia had promised not to replace Iranian crude if sanctions were imposed.
"No promise was made to Iran, its very unlikely that Saudi Arabia would not fill a demand gap if sanctions are placed," an industry source familiar with the matter told the Reuters news agency.
"If the sanctions take place, the price of oil in Europe would increase and Saudi and other Gulf countries would start selling there to fill the gap and also benefit from the higher price," said a second industry source.
Brent crude oil futures jumped nearly a dollar to over $109 a barrel after the Iranian threat, but a Gulf OPEC delegate said the effect could be temporary.