Total's CEO Christophe de Margerie Dies in Moscow Plane Crash

Dmitry Medvedenko, from the Voice of Russia radio station, reports Christophe de Margerie, the chief executive of French oil company Total, has died in an air crash in Moscow.

Total is one of the world's leading oil and gas company, operating in more than 50 countries.

Airport spokeswoman Elena Krylova said: "Tonight, a plane crashed when it collided with a snow-clearing machine. Three crew members and a passenger died."

"I can confirm that the passenger was Total's head de Margerie," she said.

Mr de Margerie, 63, had been chief executive of Europe's third largest oil company since 2007.

maintained the company's investments in Burma and Iran despite US sanctions against those countries. This year he argued Europe should maintain its energy relationship with Russia amid the conflict in Ukraine.

(via the BBC)

U.S. Sends Top Iranian Leader a Warning on Strait Threat

NYT reports:

 The Obama administration is relying on a secret channel of communication to warn Iran’s supreme leader, Ayatollah Ali Khamenei, that closing the Strait of Hormuz is a “red line” that would provoke an American response, according to United States government officials. 

he officials declined to describe the unusual contact between the two governments, and whether there had been an Iranian reply. Senior Obama administration officials have said publicly that Iran would cross a “red line” if it made good on recent threats to close the strait, a strategically crucial waterway connecting the Persian Gulf to the Gulf of Oman, where 16 million barrels of oil — about a fifth of the world’s daily oil trade — flow through every day.

Gen. Martin E. Dempsey, the chairman of the Joint Chiefs of Staff, said this past weekend that the United States would “take action and reopen the strait,” which could be accomplished only by military means, including minesweepers, warship escorts and potentially airstrikes. 

This is completely amazing. At the same time that the U.S. is warning Iran, the U.S. is doing everything in its power to prevent anyone from buying oil from Iran. It's a damn financial block of the strait by the U.S, that is really pushing Iran into a corner,

The U.S. Pushing Iran Further into a Corner

Will they eventually decide that blocking the Strait of Hormuz is a sane response. The latest release from the Treasury (my bold):

On Sunday, Secretary Geithner will depart for Beijing, China and Tokyo, Japan for meetings with senior government officials next week to discuss the state of the global economy, policies to strengthen global growth and other economic issues of mutual importance. Secretary Geithner will also discuss our continued coordination with international partners in the region to increase pressure on the Government of Iran, including financial measures targeting the Central Bank of Iran. He will arrive in Beijing, his first stop, on Tuesday.

An American Enterprise Institute Analysis that Greatly Misinforms on the Situation in Iran

AEI Resident Scholar Michael Rubin writes under the headline, The West should hand Iran's leadership a chalice of poison:

It would be a mistake to relieve the economic and military pressure on Tehran.

Tensions in the Strait of Hormuz are at a more than 20-year high after Iranian authorities threatened to close the 34-mile-wide channel through which more than one-third of the world's oil tanker traffic passes. The threats come against the backdrop of renewed international discussion of sanctions in the wake of an International Atomic Energy Agency report cataloguing Iranian efforts to develop nuclear weapon technology...Make no mistake: Iran cannot close the Strait of Hormuz for more than a day...Nor can Iran itself afford a closure of the strait. Not only does it need to export oil itself through the waterway, but, because of decades of financial mismanagement, it also depends on the strait for the import of refined petroleum products.

Aside from the fact that keeping "economic and military pressure on Tehran" is US intrusiveness into the affairs of others, Rubin does not seem to be up to date on the current US financial capabilities that could result in pushing Iran to block the Strait of Hormuz.

As I reported last week:

The U.S. Congress just passed a bill that President Obama appears ready to sign that, if fully implemented, could substantially reduce Iran’s oil revenue.

In other words, the U.S. is backing Iran into a corner. The bill could impose penalties on foreign firms that do business with Iran's central bank. Since those that import Iranian oil use the Iranian central bank for the transactions, it would likely cut off that method of Iran selling oil.

Iran is reacting as you would expect most cornered governments would act. Iran’s first vice president Mohammad Reza Rahimid said that Iran could shut down the critical shipping lanes through the Strait of Hormuz in the Gulf, if foreign sanctions are imposed on its oil exports.

The Strait of Hormuz is very important. About 33% of seaborne oil shipments (17% of world oil) go through the Strait of Hormuz. A blocked Strait would force tankers to take longer, more expensive routes that would most assuredly drive oil prices higher.

The thinking has always been that Iran wouldn't shut down the Strait of Hormuz because they use it for their own export of oil. Indeed, in an EPJ Daily Alert in November 2010, I reported:

This afternoon I attended a meeting where the speaker was Capitan Jeffrey Kline. Kline is the Program Director, Maritime Defense and Security Research Programs, Naval Postgraduate School. He is an Adjunct Professor at the Naval War College where he teaches, "Joint Analysis for the Warfare Commander"...Kline...pointed out that it might not be in Iran's interest to close the strait since Iran ships its oil through the Strait.

But, if the United States makes it impossible for Iran to sell its oil, then a key factor that would stop Iran from blocking the strait would be removed.

Would the US push Iran into such a corner? Here's what's going down

The President signed the bill into law on New Year's eve that gives him the right, for all practical purposes, to lock down Iran's ability to sell oil.

Thus, Rubin's argument that the Straight will not be shut down by Iran, because they use the Strait to export their oil, is hanging by a thread. All that is now needed is the word from the President to increase sanctions and cut off Iran's use off regular global banking operations. It will push Iran deeper into a corner. But, would the US really push Iran into such a corner? It's starting.

NYT is now reporting, today:

The countries of the European Union have taken their boldest step so far in the increasingly tense standoff with Iran over its nuclear program, agreeing in principle to impose an embargo on Iranian oil, French and European diplomats said on Wednesday....

A final decision by the European Union will not come before the end of January and would be implemented in stages to avoid major disruptions in global oil supplies. But the move by some of Iran’s most important oil customers appears to underscore the resolve of Western allies to impose toughest round of sanctions...

And the Treasury has just announced (my bold):

The U.S. Department of the Treasury today announced that Secretary Tim Geithner will travel to Beijing, China and Tokyo, Japan January 10-12, 2012, for meetings with senior government officials in both countries to discuss the state of the global economy, policies to strengthen global growth and other economic issues of mutual importance. Secretary Geithner will also discuss our continued coordination with international partners in the region to increase pressure on the Government of Iran, including financial measures targeting the Central Bank of Iran.

Far from Iran not being a threat to block the Strait, the US is pushing Iran into such a corner that the blocking of the strait becomes an option, since it appears they will have enormous difficulty selling oil, thanks to increasing U.S. pressure on other countries to stop dealing with Iran, which is then likelyt follow with sanctions put on by the U.S. with anyone that deals with the Iranian central bank .

As for Rubin's statement that Iran can't block the strait. There is an opposing view from the U.S. Navy's Captain Kline. Here's how I reported it in the EPJ Daily Alert:

I thought I would ask Kline, who might have a pretty damn good idea, if the Strait could be closed by Iran. His answer was it could. When I asked him how long it would take, he said 3 or 4 days for Iran to position ships and lay mines. He did say that the blockade could eventually be broken, but it would depend upon international co-operation and that it would take "some time". He said that Iran has missiles onshore aimed at the strait that would have to be taken out,and that Iran had other sophisticated equipment in the area including drones that could listen in on ship communications. He said ship mine sweeping can also get "very tricky".

Bottom line, the US is clearly pushing Iran into a corner. Rubin's analysis, (AEI reports are read on the Hill and by MSM), is lacking in pointing out that the bill, President Obama signed on New Year's eve, makes it more likely that Iran will attempt to block the Strait of Hormuz, especially since it appears the U.S. is muscling China and Europe to stop purchasing oil from Iran.

Further, a Naval commander, who teaches "Joint Analysis for the Warfare Commander" at the War College,   states that Iran could mine the Strait and that it would be "tricky" and take "some time" to unblock the Strait. The complete opposite view that Rubin presents.

Thus, Rubin's analysis, which fails to take into account the true developing situation, is simply setting  false security as to what may result from on going US pressures on Iran.

Will the Strait of Hormuz Turn Into the Next Pearl Harbor?

Many revisionist historians believe that the United States goaded Japan into attacking Pearl Harbor.

The historian Percy Greaves believed that the attack on December 7, 1941 was neither unexpected nor unprovoked. As his wife, Betina Bien Greaves explained:

[Greaves] was the main counsel for the Republican minority on the Joint Congressional Committee that investigated Pearl Harbor from 1945 to 1946.He attended all its hearings, interviewed many Army, Navy, and Washington principals involved in the attack and in the investigations. He researched diplomatic documents, studied reports and accounts of the event published during the years that followed. He researched diplomatic documents, studied reports and accounts of the event published during the years that followed. This book [Pearl Harbor: The Seeds and Fruits of Infamy] is not about the attack itself. It is about never before presented pre-attack and post-attack events, from the Washington point of view. Without name-calling, innuendo, or slander, Greaves simply presents the pertinent, significant and relevant facts which led the Japanese to attack and the political administration to want to cover-up its involvement.

.Burton Folsom Jr and Anita Folsom write in their new book, FDR Goes to War:

Roosevelt...employed the devious strategy of hindering all oil exports to Japan by adding layers of red tape and freezing Japan's financial assets in what has been called "a silent embargo"...The effect, by late 1941, was a trickle of oil actually going to Japan from the United States.

Bottom line, the U.S. backed Japan into a corner. It was very unwise for the Japanese to attack Pearl Harbor, but the irritation that caused the attack can be clearly seen.

What does this have to do with Iran? Well, we have already frozen some of their assets. On June 29, 2011, the U.S. Department of the Treasury announced the designation of Iran’s national police for providing support to the Syrian regime. The chief and deputy chief of Iran’s national police was also sanctioned.. As a result of the action, U.S. persons are generally prohibited from engaging in transactions with the designees and any assets they may have subject to U.S. jurisdiction are frozen.

On December 20, 2011 U.S. Treasury announced the designation of 10 shipping and other companies and one individual based in Malta affiliated with the Islamic Republic of Iran Shipping Lines (IRISL), as entities facing international sanctions for involvement in" Iran’s efforts to advance its missile programs and transport military cargoes."

“As IRISL and its subsidiaries continue their deceptive efforts to escape the grasp of U.S. and international sanctions, we will continue to take action—as we are today—to expose the front companies, agents and managers working with IRISL and work to stop this illicit business,” said Under Secretary for Terrorism and Financial Intelligence David S. Cohen.

On December 1, 2011 Cohen told the Senate Committee on Foreign Relations:

The Treasury Department’s increasingly powerful and disruptive sanctions are embedded in the dual-track strategy that the United States and our allies are pursuing to address Iran’s continued failure to meet its international obligations regarding its nuclear program. As Under Secretary Sherman describes in her testimony, the Obama Administration has presented Iran with a genuine opportunity for dialogue, creating a clear choice for Tehran. Iran’s leadership can choose to meet Iran’s international obligations, allowing Iran to deepen its economic and political integration with the world and achieve greater security and prosperity for the Iranian people. Or, Tehran can continue to flout its responsibilities and face even greater pressure and isolation...

Our broad-based pressure strategy is aimed at persuading Iran to change its course and to make clear to Iran the consequences of its continued intransigent behavior. Among the most important elements of this strategy are targeted financial measures designed to disrupt Iran’s illicit activity and to protect the international financial system from Iran’s abuse. We have focused our efforts on exposing Iranian entities’ illicit and deceptive activities, an approach that has garnered support among foreign governments and led them to take similar actions, enhancing substantially the impact of our actions. Because these actions have highlighted the pervasive nature of Iran’s illicit and deceptive conduct and the reputational risks associated with Iran-related business, the private sector around the world has taken notice and has often taken voluntary steps beyond their strict legal obligations, further amplifying government actions.

So what is the big deal? The United States is about to  up the ante and  dramatically financially isolate Iran. I am talking about the U.S. significantly cutting off Iran's access to oil revenues.

The U.S. Congress just passed a bill that President Obama appears ready to sign that, if fully implemented, could substantially reduce Iran’s oil revenue.

In other words, the U.S. is backing Iran into a corner. The bill could impose penalties on foreign firms that do business with Iran's central bank. Since those that import Iranian oil use the Iranian central bank for the transactions, it would likely cut off that method of Iran selling oil.

Iran is reacting as you would expect most cornered governments would act. Iran’s first vice president Mohammad Reza Rahimid said that Iran could shut down the critical shipping lanes through the Strait of Hormuz in the Gulf, if foreign sanctions are imposed on its oil exports.

The Strait of Hormuz is very important. About 33% of seaborne oil shipments (17% of world oil) go through the Strait of Hormuz. A blocked Strait would force tankers to take longer, more expensive routes that would most assuredly drive oil prices higher.

The thinking has always been that Iran wouldn't shut down the Strait of Hormuz because they use it for their own export of oil. Indeed, in an EPJ Daily Alert in November 2010, I reported:

This afternoon I attended a meeting where the speaker was Capitan Jeffrey Kline. Kline is the Program Director, Maritime Defense and Security Research Programs, Naval Postgraduate School. He is an Adjunct Professor at the Naval War College where he teaches, "Joint Analysis for the Warfare Commander"...Kline...pointed out that it might not be in Iran's interest to close the strait since Iran ships its oil through the Strait.

But, if the United States makes it impossible for Iran to sell its oil, then a key factor that would stop Iran from blocking the strait would be removed.

Does Iran have the capability to block the Strait of Hormuz? I also put that question to Captain Kline. Here's how I reported it in the EPJ Daily Alert:

I thought I would ask Kline, who might have a pretty damn good idea,if the Strait could be closed by Iran. His answer was it could. When I asked him how long it would take, he said 3 or 4 days for Iran to position ships and lay mines. He did say that the blockade could eventually be broken, but it would depend upon international co-operation and that it would take "some time". He said that Iran has missiles onshore aimed at the strait that would have to be taken out,and that Iran had other sophisticated equipment in the area including drones that could listen in on ship communications. He said ship mine sweeping can also get "very tricky".

According to AP:

The [Iranian] navy is in the midst of a 10-day drill in international waters near the strategic oil route. The exercises began Saturday and involve submarines, missile drills, torpedoes and drones. The war games cover a 1,250-mile (2,000-kilometer) stretch of sea off the Strait of Hormuz, northern parts of the Indian Ocean and into the Gulf of Aden near the entrance to the Red Sea as a show of strength and could bring Iranian ships into proximity with U.S. Navy vessels in the area.

Bizarrely, the U.S. has warned Iran that it will not tolerate any disruption of naval traffic through the Strait of Hormuz, that's like stealing a bully's wallet and telling him to shut up and deal with it.

It may not have made any strategic sense for Japan to attack Pearl Harbor, but sometimes you push and push and you get a reaction. The U.S. got a reaction out of Japan. It was Pearl Harbor. The legislation that President Obama is about to sign is a spit in the face of Iran, if it is used to shutdown Iran's ability to sell oil. It may get a reaction out of Iran: The blocking of the Strait of Hormuz.

This is a very high stakes game. No one knows how it will play out. Governments are generally run by mad men, and it is mad men that will decide the next move here.

More U.S. Meddling in the Middle East

The U.S. Department of the Treasury announced today that Under Secretary for Terrorism and Financial Intelligence David S. Cohen will travel to Saudi Arabia and Bahrain December 17 – 20, 2011 to discuss regional issues related to sanctions against Iran and Syria as well as the United States’ continued efforts to combat global terrorism.

According to the Treasury, Under Secretary Cohen will meet with senior government officials in Riyadh, Saudi Arabia and Manama, Bahrain to discuss options to increase pressure on the Government of Iran, including potential financial measures targeting the Central Bank of Iran.

Cheney Calls for Air Strike Over Captured Drone

It is the first ever call for an air strike over a captured drone, former Vice President Dick Cheney said on Monday that President Barack Obama should have ordered an “air strike” on Iran..

“The right response to that would have been to go in immediately after it had gone down and destroy it,” Cheney told CNN’s Erin Burnett. “You can do that from the air. You can do that with a quick air strike, and in effect make it impossible for them to benefit from having captured that drone.”

“I was told that the president had three options on his desk. He rejected all of them,” the former vice president added.

“They all involved sending somebody in to try to recover it, or if you can’t do that, admittedly that would be a difficult operation, you certainly could have gone in and destroyed it on the ground with an air strike.”

Council on Foreign Relations: U.S.-Saudi Relationship Increasingly Strained

The U.S.-Saudi relationship has become strained by increasing mistrust and misunderstanding—most recently over Egypt and Bahrain—and gone are the old foundations of the informal alliance: the Cold War and U.S. operation of Riyadh's oil fields. This is according to F. Gregory Gause III in a Special Report written for the Council on Foreign Relations: Saudi Arabia in the new Middle East.

Gause writes that Saudi Arabia is the "least affected of the major Arab states by the upheavals of 2011." He explores the foundations of Riyadh's present political stability and concludes that the House of Saud is likely to remain in place.

Gause says that Saudi concerns about the Iranian nuclear program

are so intense that they have signaled in numerous ways that—without saying it directly—they would feel it necessary to obtain their own nuclear deterrent if faced with an Iranian nuclear capacity...Riyadh would, in all probability, support an American military strike against Iranian nuclear facilities, allowing U.S. forces access to Saudi facilities if needed (though without any publicity) and upping oil production to try to calm markets in the immediate aftermath, if Washington chose that path. But the Saudis would also blame the United States for any Iranian counterstrike.

Saudi Prince Calls for Kingdom to Acquire WMDs

Bill C.K. Daly at OilPrice.com writes:

So much for peace in the Middle East.

On 5 December Prince bin Turki al Faisal, speaking at the “The Gulf and the Globe” conference in the Saudi capital Riyadh urged the six-nation Gulf Cooperation Council (GCC) to become a powerful regional bloc by establishing a unified armed force and defense structure.

While bin Turki’s call for the GCC to pool its military resources is nothing new, his idea of supporting Gulf countries acquiring weapons of mass destruction (WMDs) if Israel and Iran do not constrain their nuclear programs represents the edge of a precipitously slippery slope.

Bin Turki told his audience, "Why shouldn't we commence the building of a unified military force, with a clear chain of command. But, if our efforts and the efforts of the world community fail to bring about the dismantling of the Israeli arsenal of nuclear, chemical, and biological weapons and preventing Iran from acquiring the same, then why shouldn't we at least study seriously all available options, including acquiring WMDs, so that our future generations will not blame us for neglecting any courses of action that will keep looming dangers away from us."

Why?

Because Iran’s nuclear program, which Tehran insists is completely devoted to the generation of civilian nuclear power, is incipient, but subjected to increasing international pressure in the form of increased U.S. and Israeli-led international sanctions.

Israel, on the other hand, is a de facto nuclear power, despite Tel Aviv’s self professed policy of nuclear ambiguity.

The two programs cannot be reconciled, so, taking bin Turki’s statements to their logical conclusion, the GCC will eventually move towards a WMD capacity, which, in this case, means a nuclear capability.

Bin Turki’s comments should not be dismissed lightly.

Prince Turki bin Faisal bin Abdul Aziz Al Saud, the son of the late King Faisal, is a grandson of the late King Abdul-Azizz, brother of Foreign Minister Prince Saud and Prince Khalid, Governor of Mecca province and a nephew of the current King Abdullah.

Read more here.

Iran Selling Euros for Dollars and Gold

Iran's central bank has announced it will sell 45 billion euros from its foreign exchange reserves to buy dollars and gold, according to China's official Xinhua news agency. Xinhua said the sales would take place in three stages and that the first was already under way

Major Earthquake in Iran

A major earthquake has hit Iran. The U.S. Geological Service said the quake's magitude was 6.1.

Bandar Abbas is a major Iranian port city with oil installations including a major refinery.

Iran is the world's fourth largest oil exporter.
-EPJ Newsdesk

Iran Considers Lopping Zeros Off Currency

Iran is considering lopping three to four zeros off its currency, a top official said Monday. Money printing is causing soaring inflation. Government statistics for June show inflation at 26 percent. However, the real inflation is likely much higher. Prices for vegetables have tripled and housing prices have doubled since last summer

The governor of the Central Bank of Iran, Tahmasb Mazaheri, told state-run radio that three options are under consideration: Cutting three zeros off the rial, cutting four zeros, or boosting each rial's value to one-hundredth of a gram of gold, or about 2,500 rials at current rates.

"We are studying all these three options," Mazaheri said on state-run radio.

As per usual for most rapid inflation countries, there was no discussion of stopping the ultimate cause of the inflation, the money printing.

Dutch Intelligence: US Attack On Iran Imminent

The Dutch intelligence service, the AIVD, has called off an operation aimed at infiltrating and sabotaging Iran's weapons industry due to an assessment that a US attack on Iran's nuclear program is imminent, according to a report in the country's De Telegraaf newspaper on Friday.

The report claimed that the Dutch operation had been "extremely successful," and had been stopped because the US military was planning to hit targets that were "connected with the Dutch espionage action."

The impending air-strike on Iran was to be carried out by unmanned aircraft "within weeks," the report claimed, quoting "well placed" sources.

via The Jerusalem Post

Chances of an Attack on Iran Drop Dramatically, If...

...the U.S. sends diplomats to Iran.

Jim Lobe writes:

Citing most of the same evidence that I have written about over the past few weeks, Washington Post columnist David Ignatius, whose access to key policymakers (outside of Vice President Dick Cheney’s office) is second to no other Washington daily journalist argues in his Sunday column that the Bush administration is unlikely to bomb Iran before it leaves office. It’s an important column, not only because he is more specific about the messages conveyed by the chairman of the Joint Chiefsof Staff, Adm. Michael Mullen, (and DNI chief Adm. Michael McConnell before him)to top officials in Israel this summer — that the U.S. would “oppose overflights of Iraqi airspace to attack Iran” — but also because he has been told by a “senior official” that the administration will announce what has been rumored for the past month — that Washington will indeed open an interest section in Tehran. Given the trauma of the 1979-81 hostage crisis, I personally believe that the presence of U.S. diplomats in Tehran virtually guarantees that the U.S. will not attack Iran so long as they remain there. If the prediction of Ignatius’ senior official comes true, it’s a very, very big deal in my view....

After reading the column, you should also look at Col. Pat Lang’s caution about it on his always-incisive blog. He generally agrees with Ignatius’ analysis, expands on it in important ways, but notes that the current commander-in-chief could prove disturbingly unpredictable in the wake of the November elections...

The Soup Stained Symbol of Capitalism

Writes Omid Memarian:

For Ahmadinejad and other Iranian officials, a tie is a symbol of capitalism.

From Barack Obama's Speech in Berlin

"As we speak, cars in Boston and factories in Beijing are melting the ice caps..."

"...America cannot turn inward...No one welcomes war. I recognize the enormous difficulties in Afghanistan. But my country and yours have a stake in seeing that NATO's first mission beyond Europe's borders is a success...My country must stand with yours and with Europe in sending a direct message to Iran..."

"This is the moment when we must build on the wealth that open markets have created, and share its benefits more equitably."

There you have it, words from a member in good standing of the Greenie-Industrial Complex,the War Party and the Egalitarians.

Actually, it sounds like the man is a two war president. Escalating in Afghanistan and taking on Iran. Oh, he'll get us out of Iraq alright.

Report: New Iranian Oil Field Discovered

Iranian state TV says the country is exploring a newly discovered oil field believed to contain more than 1 billion barrels of crude oil, according to AP.

The report quotes Iranian Oil Minister Gholam Hossein Nozari as saying the area holds about 1.1 billion barrels of crude oil. He says about 220 million barrels are "recoverable." He did not elaborate.

The report broadcast on Sunday says the oil field is located near Andimeshk, in the oil-rich province of Khuzestan, located about 290 miles southwest of Tehran.

Iran is the fourth-largest oil producer in the world and ranks second in output among OPEC countries. It controls about 5 percent of the global oil supply.

Israeli Warplanes Practice in Iraq; US Bases in Iraq Might Serve as Platform for Iran Attack; Oil At New Record High

I have a sense someone is making a good buck on these Israeli exercises. If you are in the know , buy oil just before the news breaks. That's what I call real insider trading.

The Jerusalem Post reports:

Israel Air Force (IAF) war planes are practicing in Iraqi airspace and land in US airbases on the country as preparation for a potential strike on Iran, sources in the Iraqi Defense Ministry told a local news network, Friday.

The report, carried also by Iranian news outlets, claimed that recently massive nocturnal activity by IAF craft was noted in several American held airbases, including measures by the US army to increase security around the bases

According to the sources, former military officers in the Anbar province said IAF jets arrive during the night from Jordanian airspace, enter Iraq's airspace and land on a runway near the city of Hadita. The sources estimated the jets were practicing for a raid on Iran's nuclear sites.
The sources also said the American bases in Iraq might serve as a platform for the IAF from which to attack Iran. If Israeli warplanes will take off from Iraq, they can reach Bushehr in five minutes - a "record time," the sources said.

As a result of the reports on the exercise, by midday in Europe, light, sweet crude for August delivery rose $3.53 at $145.18 a barrel electronic trading on the New York Mercantile Exchange. Prices at one point jumped well over $4 to a record $145.98.

OPEC Chief Warns of 'Unlimited' Oil Prices if Iran is Attacked

Unlimited price? Don't know what that means. The price will be very high, but there will be a price.

"We really cannot replace Iran's production - it's not feasible to replace it," Abdalla Salem El-Badri, the OPEC secretary general, said in an interview with IHT.

Iran is the second-largest producing country in OPEC, after Saudi Arabia. It produces about four million barrels of oil a day out of the daily worldwide production of close to 87 million barrels.

Badri also said that steps taken by the European Union and in the United States to cut dependence on fossil fuels meant that OPEC had no alternative but to take a cautious approach before going ahead with plans to invest up to $540 billion in oil production up to 2020.

"If we don't see the demand, we are not going to invest," said Badri, adding that there was real doubt over what amount of money OPEC nations would invest after 2012.

OPEC nations "don't want to spend their money on something they cannot use," he said.

OPEC nations contribute about 40 percent of daily worldwide production.

Iran Test Fires Missiles

Iran said it test-fired a series of long- and medium-range missiles, a move that significantly ratchets up the saber-rattling between Iran and the West over Tehran's nuclear program, according to WSJ.