Iran keeps Strait of Hormuz open, despite blockade threat – DW – 06/25/2025
For a few days, the world held its breath. It seems the conflict between Israel, the US and Iran is not going to escalate any further, at least for now. Iran opted to save face by launching an attack on a US military base in Qatar, which the stock market interpreted as a de-escalatory gesture.
This retaliatory strike by Tehran was "loud enough for headlines, quiet enough not to shake the oil market's foundations," Stephen Innes of SPI Asset Management commented to Reuters. Immediately after the strike on Monday evening, the oil price fell again sharply.
And yet Iran holds a powerful trump card. It could do immense damage to the global economy by blockading the Strait of Hormuz. But would this really be to its advantage — or would it be more of an own goal?
The US Energy Information Administration (EIA) says that "Iran's economy is relatively diversified compared with many other Middle Eastern countries." However, the goods produced by the country's industry are primarily sold on the domestic market.
The export of oil and petroleum products is therefore an important source of income for the government. These constitute more than 17% of the country's total exports, with natural gas at 12%. According to the EIA, Iran was the fourth-largest producer of crude oil among the OPEC countries in 2023, and in 2022 it was the world's third-largest producer of dry gas (natural gas that is at least 85% methane, containing only negligible quantities of condensable gases such as hydrogen).
Although it has been subject to sanctions for many years, this has not prevented the Iranian regime from exporting oil. China in particular has benefited: In 2023, it took almost 90% of the oil exported by Iran.
In March 2024, the Financial Times quoted Javad Owji, Iran's Minister of Petroleum at the time, saying that Iran's oil exports "generated more than 35 billion dollars" in 2023. According to the World Bank, between April and December 2023 the oil sector represented more than 8% of Iran's GDP. And based on estimates from the data analysis company Vortexa, it is believed to have exported even more the following year.
Iran would therefore damage itself if it blocked the Strait of Hormuz. Not only would its own oil revenue be affected, it would also upset its trading partner China, which profits from buying the oil at low cost.
To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video
The London-based TV station Iran International estimates that Tehran sells its oil at a 20% discount on the world market price, because its buyers risk getting into trouble on account of the US sanctions. The broadcaster explained that Chinese refineries are the biggest buyers of Iran's illegal consignments of oil. Intermediaries mix it with deliveries from other countries, and the oil is then declared in China as having been imported from Singapore or other countries of origin.
According to Rystad Energy, an independent energy research company based in Norway, China imports a total of almost 11 million barrels of crude oil per day, around 10% of which comes from Iran.
A blockade would also have caused trouble for Iran's neighbors. Kuwait, Iraq and the United Arab Emirates also transport their oil through the passage. In a post on Linkedin, the economist Justin Alexander, a Gulf region analyst, commented that if Tehran were to close the strait, this would "undermine remaining alliances" it still has with countries in the region.
Whether Iran could actually maintain a blockade is also doubtful. Homayoun Falakshahi from the analytics firm Kpler told German TV that he believed a blockade would provoke a swift and forceful military response from both the US and European countries, and that Iran would only have been able to close the strait for a day or two.
Furthermore, if Iran's economic situation were to deteriorate even further, it would go down very badly with the Iranian people. Djavad Salehi-Isfahani, professor of economics at Virginia Tech in the US, told DW that the standard of living in Iran had already dropped to the level of 20 years ago as a result of sanctions.
These apply not only to the oil industry, but also to international payment transactions with Iran, which drives up inflation. This has been rising steeply since the beginning of the year, to more than 38.7% in May 2025 compared with May 2024. The combination of sanctions and the low exchange rate is making daily life ever more expensive for people in Iran.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
DW
4 hours ago
- DW
EU proposes 2040 climate target with carbon credit allowance – DW – 07/02/2025
The European Commission proposed setting 2040 as the target for a 90% reduction of greenhouse gas emissions. The EU wants to be carbon neutral by 2050. The European Commission on Wednesday proposed a 90% reduction in greenhouse gas emissions by 2040 when compared to levels seen in 1990. The Commission said the proposal would build on the existing binding goal of reducing these kinds of emissions by at least 55% by 2030 . "As European citizens increasingly feel the impact of climate change, they expect Europe to act. Industry and investors look to us to set a predictable direction of travel," said European Commission President Ursula von der Leyen. "Today we show that we stand firmly by our commitment to decarbonise European economy by 2050. The goal is clear, the journey is pragmatic and realistic,' von der Leyen added. The proposed amendment would provide a "more pragmatic and flexible way" of reaching the target, the Commission claimed, that would soften the 90% emissions target for European industries. Under the plan, member states would be granted more flexibility to achieve the climate targets. Currently, they have only been able to count domestic greenhouse gas reductions, but from 2036, the proposal allows carbon credits from non-EU countries to count for up to 3% of the overall 90% reduction compared to 1990 levels. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video "We are not choosing between the economy and the green agenda, we are choosing both. Europe reaffirms its commitment to a fair, ambitious, and competitive green transition," said EU Commission Vice President Teresa Ribera. "Agreeing on the 90% climate target provides us with a clear lighthouse to guide our future actions," she added. The Commission said the proposal was based on a detailed assessment by the Intergovernmental Panel of Climate Change and the European Scientific Advisory Board on Climate Change. It said it followed engagement with the various member states, stakeholders, civil society and citizens among others. Those opposing the bloc's climate action ambitions argue the measures hamper economic progress. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Poland and the Czech Republic have regularly voiced their concern over climate targets citing economic and energy security considerations. Others including Italy and Hungary are concerned about the impact decarbonizing heavy industry will have at a time when Europe is working to strengthen its industry amid fierce competition from the United States and China. The proposal will now be submitted to the European Parliament and the Council for discussion and adoption in accordance with ordinary legislative procedure.
DW
4 hours ago
- DW
How Elon Musk's third party threat could disrupt US politics – DW – 07/01/2025
Elon Musk wants to shake up the two-party system in the US after clashing with Donald Trump — but history hasn't been kind to third parties. It appears the world's wealthiest person has set his mind to a new startup: his own political party. As the ongoing public fracturing of the relationship between the US President Donald Trump and his top election financier continues to play out in public, Elon Musk has again vented his opposition to the so-called "Big Beautiful Bill," a tax and spending bill, which he believes undoes the efficiency mantra he sought to instill in Washington. Musk has gone as far to warn Republican lawmakers who pass the bill that he'll run candidates against them in next year's primaries. And he also threatened the broader US two-party system with the promise he'll form a faction of his own. "If this insane spending bill passes, the America Party will be formed the next day," he wrote on X. "Our country needs an alternative to the Democrat-Republican uniparty so that the people actually have a VOICE." A genuinely competitive third party would upend more than a century of Democrats-Republicans dominance at all levels of government. Yet few have come close, despite dozens of minor parties operating across the US for decades. The Libertarian Party, established in 1971, is the third biggest in America. Campaigning for free markets, small government and personal freedoms, it had its best presidential election performance in 2016 with candidate Gary Johnson, who won 3.27% of the nationwide vote. But that's a long way from the tens of millions of votes needed to win the White House, a governorship or even a state legislature seat. The Green Party is another long-running party that has run candidates in state and federal races. Like the Libertarians, it too holds no seats in government. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video The very nature of the American political system is the "winner takes all" principle through the widespread use of a "first past the post" voting system. This delivers victory to candidates with the most votes — almost always a Republican or Democrat. There are other factors hampering success, according to Bernard Tamas, a political scientist at Valdosta State University, US, who has written extensively on the subject. Tamas said it's fundamental for a third party to tap into popular unrest — a large number of people who are dissatisfied with the current political options — and build a groundswell grassroots movement. "One of the biggest problems with the parties that have emerged is that they're not really tapping into that anger," Tamas said. Upstart parties instead "tend to be more wishy-washy and [are] not really focusing in on that strong urge for change." If tapping into grassroots is essential, so is money. Parties spend billions of dollars to get their candidates elected. According to donations watchdog OpenSecrets, nearly $16 billion (about €13.58 billion) was spent across the 2024 presidential and congressional races. Musk himself was the biggest donor in the 2023-24 election cycle. He gave more than $291 million to Republicans across all races. Massive campaign war chests help parties "get out the vote" — buying the advertising and campaigning materials that expose candidates to the public and earn their vote. It doesn't guarantee a win — the Democrats spent more than the Republicans in 2024 — but it certainly helps. "You need money for things like ballot access and a number of other things, but no third party would ever have enough money to compete against the Republicans and Democrats on their own terms," said Tamas. Could a genuine third party supplant the Democrats or Republicans? It's unlikely in Tamas's view. Instead of winning seats and building long-term success, Tamas said they instead "sting like a bee." "They emerge very quickly, they run a bunch of candidates all over the country and then they cause one or both major parties major pain," Tamas said. "They basically are pulling away votes." This is called the "spoiler effect", where protest candidates leech votes away from an often ideologically similar mainstream candidate. In some cases, they could pull away enough votes that a frontrunner loses the lead and falls to second place. It's the fear of a third party groundswell that causes the major parties to alter their policies to appease these voters. Once the change is achieved, like a bee that's stung its victim,"it dies." "The most successful third parties in America last about a decade. Once they become too much of a threat, the major parties start stealing their rhetoric, their ideology," said Tamas. Not all Americans are happy with their options. Donald Trump's net approval rating is in negative territory and YouGov's latest polls found almost 3 in 5 Americans view the Democratic Party unfavorably. In 2022, a Pew Research analysis found overall support for more parties in the political system. But it doesn't mean a new party would succeed. A study by two US political scientists in May 2024 found "disaffected partisans" — Republicans and Democrats unsatisfied with their own parties — were less likely to vote for a third, more centrist alternative. Tapping into popular anger and frustration with the status quo, Tamas said, is the fastest pathway to success. For a person like Musk, he might do well to look towards the "Fight Oligarchy" movement of left-wing opponents like Alexandra Ocasio-Cortez and Bernie Sanders currently touring America, or the original MAGA movement, if he wants to start a party. "These are very good examples to follow… the tapping into people's grievances is really it," Tamas said. "They force the [major] parties to respond by threatening their careers and their livelihood."
Int'l Business Times
5 hours ago
- Int'l Business Times
Iran Suspends Cooperation With UN Nuclear Watchdog
Iran on Wednesday formally suspended its cooperation with the UN nuclear watchdog, a measure drawn up in the wake of unprecedented Israeli and US strikes on the Islamic republic's nuclear sites. The war between Iran and Israel, which broke out on June 13 and lasted for 12 days, has intensified tensions between Tehran and the International Atomic Energy Agency (IAEA). On June 25, a day after a ceasefire took hold, Iranian lawmakers overwhelmingly voted in favour of the bill to suspend cooperation with the agency. State media said on Wednesday that the legislation had cleared the final hurdle and was in effect. The text, published by Iranian media, states that the legislation aims to "ensure full support for the inherent rights of the Islamic Republic of Iran" under the nuclear non-proliferation treaty, and "especially uranium enrichment". The issue of enrichment was at the core of disagreements between Washington and Tehran in nuclear negotiations that had been derailed by the war. Israel and some Western countries had for long accused Iran of seeking to quire nuclear weapons -- an ambition Tehran has consistently denied. The text of the law did not specify concrete moves linked to the suspension of cooperation with the IAEA, whose inspectors have had access to declared nuclear facilities. Following the parliament vote, the bill was approved by the Guardian Council, a body tasked with vetting legislation, before a final ratification from the presidency. Iranian President "Masoud Pezeshkian promulgated the law suspending cooperation with the International Atomic Energy Agency", state TV said on Wednesday. Iranian officials have sharply criticised the IAEA for what they described as the agency's "silence" in the face of the Israeli and US attacks on Iranian nuclear sites. Tehran has also lambasted the UN agency for a resolution adopted on June 12 that accuses Iran of non-compliance with its nuclear obligations. Iranian officials said the resolution was among the "excuses" for the Israeli attacks. On Wednesday, senior judiciary official Ali Mozaffari said that IAEA director Rafael Grossi should "be held accountable" for what he called "preparing the groundwork for the crime" against Iran, referring to Israel's air raids. Mozaffari accused Grossi of "deceptive actions and fraudulent reporting", according to Iranian news agency Tasnim. Iran has rejected a request from Grossi to visit nuclear facilities bombed during the war, and earlier this week Pezeshkian decried his "destructive" conduct. Iran has said Grossi's request to visit the bombarded sites signalled "malign intent" but insisted there were no threats against him or against inspectors from his agency. France, Germany and Britain have condemned unspecified "threats" against the IAEA chief. Iran's ultra-conservative Kayhan newspaper has recently claimed that documents showed Grossi was an Israeli spy and should be executed. On Monday, Iranian foreign ministry spokesman Esmaeil Baqaei said the parliament vote to halt cooperation with the IAEA reflected the "concern and anger of the Iranian public opinion". The 12-day war began when Israel launched a major bombing campaign on Iran and killed top military commanders and nuclear scientists, with Tehran responding with waves of missiles and drones launched at Israel. On June 22, Israel's ally the United States launched unprecedented strikes of its own on Iranian nuclear facilities at Fordo, Isfahan and Natanz. More than 900 people were killed in Iran, according to the judiciary. Iran's retaliatory attacks killed 28 people in Israel, according to authorities. US President Donald Trump said the US attacks had "obliterated" Iran's nuclear programme, though the extent of the damage was not clear. Iranian Foreign Minister Abbas Araghchi has admitted "serious" damage to nuclear sites. But in a recent interview with CBS Evening News, he said: "One cannot obliterate the technology and science... through bombings."
