The European Union has reiterated plans to impose sanctions on Iran while the United States has vowed to protect international shipping lanes after Tehran threatened to close the vital Strait of Hormuz in response to Western measures.
The U.S. Fifth Fleet said it would not permit any disruption of traffic in the Strait of Hormuz, which is crucial for the global oil trade.
"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," Reuters quoted a spokesperson for the Bahrain-based fleet as saying. "The free flow of goods and services through the Strait of Hormuz is vital to regional and global prosperity."
Michael Mann, a spokesman for EU foreign affairs chief Catherine Ashton, told the Agence France-Presse that the EU was considering another set of sanctions against Iran despite Tehran's threat.
"We expect the decision will be taken in time for the foreign affairs council on Jan. 30," he said, referring to the next meeting of EU foreign ministers in Brussels.
France called on Iranian authorities Wednesday to respect international law and navigation rights.
"As with human rights and nuclear proliferation, we are calling on the Iranian authorities to respect international law and in particular the freedom to navigate in international waters and straits," French Foreign Ministry spokesman Bernard Valero said. "The Strait of Hormuz is an international strait. Therefore all ships, no matter what flag they fly, have the right of transit passage."
Iranian Vice President Mohammad Reza Rahimi warned Tuesday that "not a drop of oil will pass through the Strait of Hormuz" if the West broadened sanctions against Iran over its nuclear program.
Navy Adm. Habibollah Sayyari also said his country could easily close the Strait of Hormuz, the Associated Press reported; he also told state-run Press TV that the Navy was in control of the vital waterway.
More than a third of the world's tanker-borne oil passes through the strait, which links the Gulf -- and its petroleum-exporting states of Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates -- to the Indian Ocean. The United States and the 27-nation EU are considering new sanctions aimed at Iran's oil and financial sectors but EU governments have been divided over whether to impose an embargo on Iranian crude.
Oil from Iran in 2010 amounted to 5.8 percent of total EU imports, making Tehran the bloc's fifth-largest supplier after Russia, Norway, Libya and Saudi Arabia.
Saudis Pledge More Oil after Iran's Hormuz Threat
Iran has threatened to shut the Strait of Hormuz to oil tanker traffic if its oil exports are also covered by a set of sanctions the West imposes on the Islamic Republic, lifting the crude oil price over $101 a barrel on Tuesday, but the upward pressure was somewhat eased when a high ranking Saudi official calmed markets when he said the other Gulf states are ready to offset Iranian oil loss in the global market.
"Closing the Strait of Hormuz for Iran's armed forces is really easy ... or as Iranians say it will be easier than drinking a glass of water," Iran's Navy Chief Habibollah Sayyari told Iran's English language Press TV on Wednesday, sending more shockwaves through the market. "But right now, we don't need to shut it as we have the Sea of Oman under control and we can control the transit."
Sayyari is leading 10 days of exercises in the Strait. The Saudi oil ministry official told the Associated Press, however, that OPEC kingpin Saudi Arabia and other Gulf producers were ready to step in if necessary. He did not say what other routes the Gulf nations could take to ship the oil if the strait was closed off. The official spoke late Tuesday on condition of anonymity because he was not authorized to discuss the issue.
They slipped back on Wednesday in thin trade and as the market dismissed it as rhetoric.
"The threat by Iran to close the Strait of Hormuz supported the oil market yesterday, but the effect is fading today as it will probably be empty threats as they cannot stop the flow for a longer period due to the amount of US hardware in the area," said Thorbjoern bak Jensen, an oil analyst with Global Risk Management.
According to the U.S. Department of Energy, the Strait of Hormuz is "the world's most important oil chokepoint." The State Department said there was an "element of bluster" in the threat, but underscored that the United States, whose warships patrol in the area, would support the free flow of oil.
It was not immediately clear what Sayyari meant by controlling the Sea of Oman, but the Iranian navy has been developing its presence in international waters since 2010 for counter-piracy operations and also to show off its naval power. Iran's international isolation over its defiant nuclear stance is hurting the country's oil-dependent economy, but Iranian officials have shown no sign of willingness to compromise.
Iran dismisses the impact of these penalties, saying trade and other measures imposed since the 1979 Islamic revolution toppled the U.S.-backed shah have made the country stronger. During a public speech in Iran's western province of Ilam on Wednesday, President Mahmoud Ahmadinejad implied Tehran had no intention of changing course.
"We will not yield to pressure to abandon our rights ... The Iranian nation will not withdraw from its right (to nuclear technology) even one iota because of the pressures," said Ahmadinejad, whose firm nuclear stance has stoked many ordinary Iranians' sense of national dignity.
Some Iranian oil officials have admitted that foreign sanctions were hurting the key energy sector. Though four rounds of the UN sanctions do not forbid the purchase of Iranian oil, many international oil firms and trading companies have stopped trading with Iran. So far, big trade partners of Tehran -- Russia and China -- have blocked a ban on Iran's oil exports at the United Nations.
Iran's arch-foes Israel and the United States have not ruled out military action if diplomacy and sanctions fail to rein in Iran's nuclear work. The presence of U.S. naval forces in the Gulf to secure a free passage for oil has increased concerns over a possible military conflict if Iran tries to block the waterway.
Analysts say Tehran could retaliate against any military strike by launching hit-and-run attacks in the Gulf and by closing the Strait of Hormuz. About 40 percent of all traded oil leaves the Gulf region through the strategic waterway.
An Iranian analyst who declined to be named said the leadership could not reach a compromise with the West over its nuclear activities as it "would harm its prestige among its core supporters."
"Iranian officials are showing their teeth to prevent a military strike," said the analyst. "Closing off the Strait of Hormuz will harm Iran's economy that will be very dangerous for the establishment ahead of the parliamentary vote."
Turkey Strikes Historic Gas Deal with Russia
Just two days after signing a memorandum of understanding with Azerbaijan to build a massive east-west pipeline, Turkey struck another historic gas deal Wednesday with Russia, allowing the energy giant to develop its plans for future exports to Europe.
Prime Minister Vladimir Putin, who received written permission for the South Stream project from visiting Turkish Energy Minister Taner Yıldız, described the approval as "a big event in Europe's energy sphere," Russian news agencies reported.
"I would like to thank Turkey for its decision to issue final approval to construct the South Stream pipeline through Turkey's special economic zone," Putin said during talks with Yıldız, according to the AFP.
Along with the deal, Turkey and Russia gained extra time to solve a dispute over the Westline, a pipeline that supplies six million cubic meters of gas to Istanbul and its environs every year. The South Stream project, which passes through the Black Sea, is scheduled to start operating in 2015.
The line will ship up to 63 billion cubic meters of gas annually to Bulgaria, Serbia, Hungary, Slovenia, Austria and Italy in one leg and Croatia, Macedonia, Greece and Turkey in another.
The permission was the final hurdle to the pipeline's construction, and Russian energy giant Gazprom's chief executive, Alexei Miller, described it as "the most serious proof" that the project would be completed by 2015.
"The South Stream project has entered a new phase: construction," Reuters quoted Miller as saying. "The permission is final."
South Stream, funded by Gazprom, France's EdF, Italy's Eni and Germany's Wintershall, rivals the European Union-backed Nabucco pipeline that is slated to ship gas from the Caspian region to Austria. Turkey has said the two projects should complement each other. However, many analysts believe the recent moves by Turkey cloud the future of Nabucco, nearly two-thirds of which is projected to pass through Turkey.
Turkey and Azerbaijan signed a memorandum of understanding on Monday to establish a venture that will build the Trans-Anatolia pipeline, which stretches across Turkey from east to west, with a capacity of 16 billion cubic meters a year.
Socar will work with Turkey's state-owned pipeline operator BOTAŞ Boru to build the 2,000-kilometer conduit. Socar will hold 80 percent of the venture, Yıldız said Monday.
Russia sees the South Stream as the final replacement for the Ukrainian route for Russian gas, and it has been anxious to gain control, or at least a substantial share, of the Ukrainian export pipeline as EU states receive more than a quarter of their gas from Russia.
Gazprom said it had also resolved a deliveries dispute with Turkey that saw Ankara revoke a contract with Russia earlier this year. Gazprom said delivery terms for both the Westline to Istanbul and the Blue Stream pipeline under the Black Sea had been agreed through the end of 2012.
Terms of the agreement were not disclosed, but the Russian media had earlier reported that Turkey was purposely delaying its approval of the South Stream route in order to bargain for lower prices. The contracts signed with Turkey's BOTAŞ, the state-run pipeline company, will allow Gazprom to boost exports to Turkey by 2 billion cubic meters next year, Miller said, according to Reuters.
"There is no new agreement with Russia concerning the purchase of natural gas from the Westline," Anatolia news agency quoted Yıldız as saying.
However, Yıldız said the parties agreed to transfer 3 billion cubic meters of gas that had originally been slated for transport via Blue Stream to Westline until Turkish private companies struck a deal with Russia.
BOTAŞ had withdrawn from Westline due to a price dispute with Russia in September. Since then, Turkish private firms have been bargaining on possible gas exports from Russia.
"We have signed a new addendum until private companies sign an agreement for the Westline," Yıldız said.
Turkish Approval of South Stream Gives Russia Huge Boost
Just a couple of days before the end of 2011, Turkey has given its approval for the South Stream pipeline project, which will transport Russian natural gas to Europe by passing through Turkish territorial waters.
The deal is a major blow to Kiev because it will bypass Ukraine, linking the pipelines of the Gazprom-led link on Bulgarian territory after passing through Turkey's territorial waters. Bulgaria and Russia have already sorted out ownership issues with regard to the pipeline in Bulgarian territory.
The Ukrainian embassy in Ankara declined to comment on the agreement, saying the embassy will issue a statement later.
The formal agreement between Turkey and Russia was signed on Wednesday in Moscow between the heads of the state-owned Turkish Pipeline Corporation, or BOTAŞ, and Russian energy giant Gazprom. Turkish Energy Minister Taner Yıldız, Russian Prime Minister Vladimir Putin and Deputy Prime Minister Igor Seçin were also present during the ceremony.
Parliament's Industry, Trade, Energy and Technology Commission Chairman Mücahit Fındıklı hailed the agreement as a "success" from the Turkish perspective, saying Turkey has reaffirmed its position as a secure energy supply route.
"The gas security of Europe hinges on Turkey. This geopolitical position of Turkey brings economic benefits to Turkey as well," he told Today's Zaman. "Other pipeline projects with which Turkey is involved do not compete with South Stream but rather complement it. Turkey is playing its role very successfully."
Pleased with Turkey's decision, Putin described the agreement as "a New Year's gift for Russia," stressing that Russia has realized once more that Turkey is a reliable partner.
"Turkey's approval is the most serious evidence that the project will be built in strict accordance with the schedule -- that is by the end of 2015," said Gazprom Chief Executive Alexei Miller.
Russia was expecting that permission for construction of the pipeline would be given by the end of October 2010, but demands from Turkey for seismic reports on the pipeline route that would pass through Turkey's Exclusive Economic Zone in the Black Sea delayed the project. Gazprom completed the technical and ecological aspects of the South Stream route and submitted it to the governments of Russia, Turkey and Bulgaria last April.
The South Stream pipeline project was initiated by Russian company Gazprom and Italian company, Eni, in 2007, and the two giants established a joint company for the project in 2008.
Germany's Wintershall AG and France's Électricité de France SA, or EdF, also hold minority stakes in South Stream. Bulgaria, Serbia, Hungary and Greece also signed on to participate in the project. Bulgaria recently announced that it has scrapped the Trans-Balkan Pipeline, another deal that would expand Russian sales by carrying Russian oil to Greece, for financial reasons.
Some analysts say Turkey's delay could be a policy used by the government to obtain extra time for the Nabucco pipeline project, which is seen as a rival to South Stream and is strongly backed by the European Union and the United States. Russia argues that both South Stream and Nabucco will be needed to carry gas from the Caspian to the European market, but it is prepared to launch South Stream right away, while Nabucco still needs investment capital.
In an interview with Today's Zaman in March, Yıldız confirmed that Turkey would abide by the terms of a 2009 agreement with Russia over a proposed underwater pipeline to carry natural gas to Europe bypassing Ukraine. He said at the time that the Turkish position on the $21.5 billion pipeline project called South Stream had not changed.
"We are still waiting for the environmental impact studies as well as feasibility studies on South Stream to see if the required criteria demanded by Turkey are met. If met, there is no question we would give our approval to the project," he said.
Yıldız, who is also co-chairman of the Turkey-Russia Joint Economic Commission, emphasized that relations with Russia have never been as friendly and constructive as they are today.
"We are working very closely with our Russian partners in developing joint economic interests," he said, dismissing claims of a rift over competing pipeline projects.
South Stream will transport up to 63 billion cubic meters of gas when it opens in 2015.
Turkey is a partner in South Stream's competition, the $10.8 billion European Union-sponsored Nabucco project, which aims to ship Caspian and Middle Eastern gas to Europe. During the interview, Yılmız dismissed the idea that the pipelines are competing with each other but rather said it was normal to have different pipeline proposals to carry natural gas to Europe.
"The main idea is to transport the gas to European markets that need this supply. Both pipelines have European partners. Big projects like these always have problems everywhere. It happened during the construction of the Baku-Ceyhan oil pipeline. These are natural," he explained.
Turkey has thrown its support behind both projects, hoping to boost its position as an energy hub to the West, as well as securing domestic supply from diversified resources.
On Wednesday, both sides also signed two more agreements extending long-term gas purchase contracts from the West Pipeline until 2021 and 2025. Turkey announced earlier that it had decided to discontinue buying natural gas via the Western Pipeline from Russia next year due to Gazprom's refusal to reduce the price of natural gas to what Turkey considers a reasonable level. Russia agreed to supply more gas to Turkey in 2012.
According to the agreement signed in 1986, either side had to notify the other of its intention to terminate the contract six months before Dec. 31, 2011, or the contract would continue for five more years. In this framework, negotiations were extended until Sept. 30.
Russian energy giant Gazprom announced on Monday that it will continue to sell natural gas to private firms in Turkey after the termination of the Russia-Turkey Western Pipeline contract last week.
In remarks to Today's Zaman in Moscow, Gazprom Deputy Chairman Alexander Medvedev said: "We expect that demand from our customers in the industry and trade sectors will continue."
Medvedev explained that Gazprom has received an official letter from BOTAŞ, notifying them that the contract would be terminated and would not be renewed by the state-owned company. He underlined that Gazprom will continue to sell natural gas to its existing private partners and is willing to make deals with new partners and added: "We are ready to supply the same amount of gas to private companies, which then supply the final consumers in the Turkish market."
Energy expert Arif Aktürk, a former BOTAŞ official, said Turkey had to extend gas agreements with Russia and the price for the renewal was to give a nod to the Russian South Stream project.
"Russians called the Turkish bluff on canceling the contract because the request for a lower price for the gas was rejected. For the security of uninterrupted gas supply to the Turkish market, the government had to yield to Russian demands on another project," he told Today's Zaman.
Aktürk also argued that South Stream would benefit Europeans, very much like the Nabucco pipeline, and Turkey doesn't have much to gain from either unless it positions itself as gas hub country rather than just a transit country.
Medvedev, earlier in December, said extensive studies in the Black Sea have already started and that transportation of natural gas is planned to begin in 2015, but Turkey's refusal to allow construction in its territorial waters has slowed the project. Medvedev said ongoing negotiations with Turkey suggest that permission for construction would most likely be given by the end of the year.
Just last week, Turkey and Azerbaijan signed an agreement for a new "Trans-Anatolian" natural gas pipeline stretching from Turkey's eastern to western borders. The 2,400-mile, $5 billion pipeline would transit natural gas from Azerbaijan's Shah Deniz II fields in the Caspian Sea across Turkey and would become part of a new Southern Corridor gas route to European markets.
The stand-alone pipeline could also be connected to the proposed Nabucco pipeline project, which is designed to carry gas from the Caspian region and the Middle East through Turkey to Europe.
Term Row 'Becoming Awkward,' Gul Says
President Abdullah Gül has expressed frustration at the continued debate over the length of his term in office, urging politicians to make a swift decision on the matter.
"I won't say anything about the length of my mandate. I hope very much that a decision on this is made in the shortest possible time because the situation is becoming awkward," Gül said told the private Kanal 24 channel late Dec. 27.
The ruling Justice and Development Party, or AKP, said Gül's mandate should be seven years – meaning that it would be exempted from constitutional amendments passed in 2007 reducing presidential terms to five years.
Prime Minister Recep Tayyip Erdoğan is seen as the strongest contender to succeed Gül as head of state, and political pundits have suggested that Gül may return to the AKP helm and eventually become prime minister.
"I don't have any political ambitions or expectations. There is nothing like that on my mind," Gül said, but added that he did not believe in "retirement in life."
Gül also denied that he aspired to become the United Nations' secretary-general. He also voiced discomfort over lengthy pre-trial detentions and said Turkey's international prestige could suffer over restrictions on free speech and media.
"As far as I can see, the detention periods have begun to hurt public sensitivities. A way must be definitely found to shorten them," he said. "Those who have done wrong should be held accountable. But we cannot be at ease if anyone spends even half an hour in jail unjustly."
Gül said democracy, human rights and free speech were at the core of Turkey's "soft power" and progress made in recent years should not be overshadowed.
"I see that complaints are on the rise. I see some developments at the United Nations concerning human rights issues [in Turkey] that are not good. We have to prevent Turkey from falling among the countries with whom it should not be seen together," he said.
Touching on the Kurdish issue, Gül said using "police-state methods" to combat the outlawed Kurdistan Workers' Party, or PKK, and its supporters would be "unthinkable," but added that "authority in some provinces has been taken over by others."
The PKK, he said, had the misconception that reforms expanding Kurdish freedoms came as a result of its violent campaign against the state.
"If the terror organization believes it is stronger and has the upper hand, it has to be shown that this is not the case. And this is what is happening at present," he said, praising better coordination between the security forces against the PKK.
Gül said Turkey's reform process had put civilian-military relations "on a democratic track" and that the military had now "pulled back to its area of responsibility."
The PKK is listed as a terrorist organization by Turkey and much of the international community.
Turkey Warns France of More Action over Genocide Bill
Turkey on Wednesday warned France it would take further action against Paris should the French Senate pass a bill making it a crime to deny the 1915 mass killings of Armenians in Ottoman Turkey constituted genocide.
Ankara reacted furiously when the lower house of the French parliament last week approved the bill, recalling its ambassador from Paris, banning French military aircraft and warships from landing and docking in Turkey and freezing political and economic meetings.
Prime Minister Tayyip Recep Erdoğan slammed the bill as "politics based on racism, discrimination and xenophobia" and turned his anger on French President Nicolas Sarkozy, accusing France of colonial massacres in Algeria.
In a statement, the National Security Council, or MGK, the top state body for security matters, said it hoped "common sense" would prevail in France and that Paris would give up on its "mistake."
France is Turkey's fifth biggest export market and the sixth biggest source of its imports, with bilateral trade worth $14 billion in the first 10 months of 2011. The National Security Council comprises Turkey's top generals, Erdoğan, members of the cabinet and President Abdullah Gül.
"About this subject, measures announced by the government and further additional measures would be announced depending on France's steps," the National Security Council said at the end of a five-hour meeting. "If the proposal passes into law, there will be an objection in every way against this unfair measure."
The French bill, which will be debated in the Senate next year, has caused outrage in Turkey, which argues killings took place on all sides during a fierce partisan conflict.
Erdoğan, whose personal animosity towards Sarkozy is well-known for the Frenchman's opposition to Turkish membership of the European Union, has suggested Sarkozy was angling for ethnic Armenian votes in next year's presidential election.
Buoyed by its fast-growing economy while Europe battles a financial crisis and angered at its stagnant bid to join the EU, Ankara feels it has little to lose in a political fight with Paris.
Turkey's Economy Minister Zafer Çağlayan has said French investments in Turkey are safe but has suggested that "consumers might take matters into their own hands".
More Than 20 Killed in Military Operation
At least 20 people were killed in a Turkish air raid near the Uludere township of Turkey's Şırnak province, which borders Iraq last night, with claims that they were not members of the armed Kurdistan Workers' Party, or PKK, but diesel smuggling peasants.
The air assault, which also utilized unmanned aerial vehicles, was conducted near the Ortasu village of Uludere, Şırnak, according to the Doğan News Agency.
"The unmanned drones and thermal cameras detected a big group [of individuals] on the Iraqi side of the border, and jets took off. The bombardment started at 11 p.m. [Turkish time] and more than 20 people were killed," the agency said.
Four bodies were brought to the Şırnak State Hospital, while peasants took many charred bodies to the Ortasu village atop tractors and mules. According to the villagers, the bodies were charred as their diesel drums exploded, while some were left under the rubble of a big rock under which they took shelter.
"We have 30 corpses, all of them are burned. The state knew that these people were smuggling in the region," Reuters quoted Fehmi Yaman, the mayor of Uludere, as saying.
The Governor of Şırnak confirmed that more than 20 people were killed.
Greek Cyprus: Field Holds 5 to 8 Trillion Cubic Feet of Gas
A field off Cyprus where the United States firm Noble Energy is conducting exploratory drilling holds an estimated five to eight trillion cubic feet (140-230 billion cubic meters) of natural gas, a significant find for the small island, the country's leader announced Wednesday.
President Dimitris Christofias said the offshore discovery puts Greek Cyprus on Europe's energy map and is attracting the interest of many foreign investors. But it could also risk heightening tensions with rival Turkey, which doesn't recognize Greek Cyprus as a sovereign state.
It's the first time the size of the deposit has been estimated based on actual drilling results. The site is some 185 kilometers (115 miles) south of the east Mediterranean island near a huge Israeli gas field estimated at 17 trillion cubic feet (480 billion cubic meters).
Officials have said that a trillion cubic feet of gas could meet the island's energy needs for three decades.
Greek Cyprus was split into an internationally recognized Greek Cypriot south and a Turkish Cypriot north in 1974, when Turkey intervened after an abortive coup by supporters of a union with Greece.
Turkey opposes any energy search by Greek Cypriots on grounds that it could undermine the rights of Turkish Cypriots to oil and gas wealth. Greek Cypriots, however, contend that the gas could act as an incentive to speed up a peace accord, benefiting both Turkish Cypriots and Turkey.
Under strain from Europe's financial crisis, Greek Cypriot officials see the gas find as a potential boost to the island's 18 billion euro ($23.5 billion) economy, which is forecast to grow by a meager 0.2 percent of gross domestic product next year.
Turkey Sends Police Tools to Libya
Nearly 6,000 pieces of police equipment, including uniforms, boots, cartridge belts and clubs, given by Turkey, arrived in Misrata Wednesday.
"As Turkey, we have shown once again that we are with Libya in all fields. Our support and assistance to Libya will continue," said TİKA's Libya coordinator, Halil İbrahim Okur. The equipment donated by the Turkish International Cooperation Agency, or TİKA, was sent to Libya from Istanbul's Sabiha Gökçen International Airport.
Meanwhile, the first Libyan political party established after the 42-year rule of Moammar Gadhafi is reportedly taking Turkish Prime Minister Recep Tayyip Erdoğan and his Justice and Development Party, or AKP, as a model.
The Libya Motherland Party was founded by Abdullah Benun, who has worked on Ottoman and Turkish history.