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Iran War: Conflicting Reports on Momentary Pause – Restart of Talks or Iran Readying Big Strike? Russia Diesel Export Halt and Qatar LNG Pullback Increase Energy Pressure

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So here it is, a Friday. Predictably, there are new and not-convincingly sourced reports on negotiations with Iran being back on. We featured a tweet two days ago that said they had heard that Trump-Israel tout in chief, Barak Ravid of Axios, would run yet another of his “deal is on track” articles before the weekend. The wee difference this time is that there is weak corroboration, from a single anonymous source to MSNBC. We have warned before that single anonymous sources, unless they provide documents too, should be taken with a fistful of salt. Even if they are reporting what they know accurately, they may be missing big part of the picture.

This cheery news contrasts with an exclusive report from Suliman Ahmed via Daniel Davis that Iran is seriously planning a big set of strikes, which would launch in what would now be the next 30 hours.

There is admittedly a mini-pause on, but that may well be due to debates in Iran as to how and how much to escalate. A short overview of the latest on the kinetic front from NO1:

Iran war round two: US strikes ~90 more targets, Iran fires multiple missile waves, US denies its own strikes. CENTCOM announced completion of strikes on ~90 Iranian military targets with explosions across Bandar Abbas, Sirik, Bushehr and Chabahar; Iran’s IRGC hit US bases in Kuwait, Bahrain, Qatar and Jordan. Iran’s Health Ministry reports 14 killed, 78 injured across five provinces. Curiously, the US and Gulf states denied the newest wave on the Konarak naval base, which OSINT reads as an attempt to dodge retaliation

Let us not forget that any negotiations are simply rearranging deck chairs on the Titanic. Iran will never cede to the US demand that the Strait of Hormuz be “open” or under some sort of joint administration. Oman has disqualified itself with its rejection of transit fees.1 No amount of US huffing and puffing and bombing, or Israeli assassinations, will change the fact that Iran can engage in shooting practice and commercial transits in the Strait of Hormuz, as in bring vessel movements ex Iran friendly ships, to a tiny trickle. And Iran can keep that up for as long as it takes to get the US to cut it out, even if the outcome is to create a global depression.

The reason the US is still so doggedly fighting the inevitable is that this power struggle is not about Iran making money on its own, or even about Israel, even if Israel flatters itself otherwise. It is that the Gulf states and their energy exports become hostage to Iran. Admittedly, as the rising anger in the Iran public confirms, Iran seems to be slow-walking its responses to the US. This may be due to Iran having both complex internal decision processes and a plethora of alternatives, which ideally should be gamed out a few move, or pressure from China, which has repeatedly pressed for a negotiated solution, or Iran judging that it has not yet reached the point of optimal leverage and is better served to wait until the inventory situation in the US goes critical.

Amazingly, it may be that the US that was responsible for the ambiguously-worded Article 5 language that Iran insists gives it control during the 60-day MOU period. Yet more proof that the Trump team cannot negotiate its way out of a paper bag. From the Wall Street Journal in The Fight Over Hormuz Boils Down to One Poorly Worded Clause in Trump’s Deal:

The root of the dispute is Paragraph 5, which says Iran will make arrangements to restore shipping through the strategic waterway and then work with Oman to determine how to administer it in the future. But it also includes an Iranian pledge to ensure safe passage and remove military obstacles such as mines.

Trump administration officials saw that clause as unlocking the strait…Iranian hard-liners, however, have used it to push a maximalist interpretation that gives the Islamic Republic exclusive control over the waterway as a key source of leverage.

The U.S. and its Arab Gulf allies don’t want Iranian hegemony over Hormuz, the lifeline for much of the world’s oil and gas supply. The language of the deal has left the two sides fighting over that point rather than making progress on a final agreement on Tehran’s nuclear program.

“This gap in interpretation is wide, baked into the deal, and not exactly surprising,” said Michael Horowitz, an Israeli geopolitical analyst. “Washington has tried to convince Tehran that compliance would be more profitable, but this framing misses the point. Iran’s behavior isn’t driven by financial motives but by security concerns and bargaining leverage. It’s a power dynamic.”…

“The flaw of the MOU was not so much that it avoided the nuclear issue, but that it apparently papered over major differences between the U.S. and Iran on the key issues the agreement was intended to solve—the ceasefire, the status of the Strait, and sanctions relief,” said Eric Brewer, a former senior Iran analyst in the U.S. intelligence community. “Either the U.S. didn’t know about those differences or chose to ignore them.”

The article finesses who provided that section but it was likely worked over by both sides. The Wall Street Journal makes it sound as if the US side provided it by calling it “Trump’s Deal” the headline. Earlier reports said the US rejected a 10, later 14 points pact drafted by Iran, which makes it sound as if Iran was the primary drafter.2

Admittedly, Iran has held off from messing with Oman-side transits for now:

From the body of the tweet:

All of them had their AIS off, but there was one Indian cargo ship that had it on when it went through. The list can be seen below.

Following two days of US strikes, the US is back to escorting ships in. My guess is that it will try to escort a group out tonight, and Iran can either respond and create more escalation going into the weekend or it can lose leverage.

The Oman lane will be heavily contested in the coming days, which leaves either side with no choice but to escalate.

And the table:

Although it may be that Iran thinks it has made its point:

The full body of the tweet:

JUST IN: In last 24 hours, Despite one of the heaviest U.S. air deployments over the Strait of Hormuz in recent months — including multiple AWACS, dozens of Pegasus and Stratotankers, MQ-9 drones, and fighter jets — the U.S.-backed Omani corridor continues to see almost zero visible commercial traffic.

MarineTraffic data over the past 24 hours shows approximately 10 merchant vessels completed transit via Iran’s northern route, while only one vessel used the U.S.-supported southern Omani corridor. At least two vessels initially headed for the Omani corridor before changing course and crossing into Iran’s designated route instead.

The southern corridor has been largely abandoned since July 7. The only visible traffic is overwhelmingly using Iran’s route The U.S. air umbrella hasn’t changed the calculus. Iran’s IRGC is enforcing its terms, and commercial shipping is complying.

Countering noises about new peace feelers is a report from the one Western reporter allowed to follow the funerals for the Supreme Leader and other war martyrs, via Daniel Davis, that Iran is reading a very big attack that will go live in what would now be the next 30 hours. We had provided tweets early in the week that Iran was readying the mother of all retaliations.

But the West does not take “no” for an answer:

There is also more informational fog about who did what to whom in the last set of strikes. The US is trying to claim that it had nada to do with the some of the last ones on Iran, which is an insult to intelligence given the need for targeting support. Are we to believe that Kuwait would put its hand up to be whacked again by Iran for a new strike from Kuwait to Bushehr (not the nuclear site proper but still….)?

Given the Trump threat to attack more bridges in Iran, it is hard to pretend the US was not behind this strike. Many commentators focused on the fact that this bridge was part of an important transport route to China. But the Financial Times made this strike a lead story and focused on how the timing would interfere with mourners going to the assassinated Supreme Leader’s burial.

One might ask if the US is trying to turn entire Muslim world against it? From the body of the article:

Iran said the US had targeted railway bridges on the route to the holy city of Mashhad, where the late supreme leader was due to be buried, in the first attacks on Iranian infrastructure in months as tensions escalated between the foes.

The overnight strikes came as vast crowds were gathering in Mashhad for the long-delayed burial ceremony on Thursday for Ayatollah Ali Khamenei…

Passenger train services from the capital Tehran and other southern cities to Mashhad were disrupted on Thursday morning by the strikes, one of which hit a bridge 55km from the holy city.

The moves were seen in Tehran as a provocation. Iran’s foreign ministry said the attacks while Khamenei’s six-day funeral procession was under way signified Washington’s “inability to comprehend the depth of Iranians’ patriotism and loyalty to the revolution’s ideals”.

The Financial Times, late in the article, appeared compelled to repeat the Western trope that the “regime” does not have majority support even now:

While Khamenei presided over growing domestic anger about economic stagnation, corruption and Iran’s international isolation, the funeral has drawn members of a committed minority of regime supporters within the country’s population of 90mn, many of whom oppose negotiations with the US.

“If the US hit our infrastructure, we will build it again,” said Fatemeh, a young woman waiting in the summer heat.

She said she suspected that the Tehran-Mashhad railway had been struck because the US wanted to divert attention from the crowds of millions that have turned out for the funeral processions across Iranian cities and in Iraq, and to deter mourners from attending Thursday’s ceremony.

“Look at the crowd,” she said. “This shows our resilience and sacrifice.”

This claim is credible in light of the importance of getting the bridge back into service plus the Iranian success in getting its communications restored at the start of the war in 8 hours when the US and Israel had anticipated they would remain down for two to three days:

And on the afore-mentioned strike on Bushehr:

And from Hamidreza Azizi on Twitter:

Although the U.S. strikes last night were concentrated primarily on #Iran’s southern coastline, there were also reports of attacks on civilian targets in other parts of the country.

Most notably, part of a bridge in Aq Qala, in Golestan Province, was reportedly targeted. The bridge forms part of the railway connection between Iran and Turkmenistan.

This can be interpreted as a signal that the U.S. may expand its targeting of Iranian transportation and connectivity infrastructure. Some analysts in Iran view this as an indication that, if the U.S. decides to escalate further, any renewed naval blockade of Iran could be accompanied by strikes on the infrastructure that enables the Iranian economy to function under blockade conditions.

From this perspective, this is both the signal being conveyed and a scenario that some observers believe is being considered by Washington.

Now to the “peace talks versus escalation” chatter. From Axios Regional mediators push to salvage U.S.-Iran deal

Qatar, Pakistan and other regional mediators are trying to de-escalate tensions between the U.S. and Iranand revive negotiations on a nuclear deal, according to two sources from the mediating countries and a U.S. official.

Why it matters: While President Trump announced on Wednesday that the U.S.-Iran memorandum of understanding (MOU) and the ceasefire were “over” and ordered two rounds of airstrikes, he is focused on reopening the Strait of Hormuz and still wants to avoid a return to an all-out war with Iran.

  • The mediators think that, regardless of the recent escalation, the parties made progress toward a nuclear deal in earlier rounds of talks and want to prevent the MOU from collapsing.
  • A regional source from one of the mediating countries said the mediators believe the recent Iranian attacks in Hormuz were initiated by elements inside the Iranian regime that oppose the MOU and want to undermine it…..

State of play: After two days of exchanges of fire between the U.S. and Iran, Thursday was much calmer.

  • Despite reports in some Iranian media outlets regarding explosions in southern Iran, U.S. officials said the U.S. military didn’t conduct any new strikes on Thursday.
  • One U.S. official said it was a result of the de-escalation efforts.

And from Middle East Eye’s live feed:

Report: US official says ‘technical talks’ with Iran ongoing, despite attacks

The US will continue to take part in “technical talks” with Iran, despite the recent exchange of attacks, according to MS NOW – formerly known as MSNBC.

According to the report, a US official indicated that Washington remains committed to finding a solution to the war.

This comes following comments made by Trump, where he declared at the NATO summit in Turkey’s Ankara that the ceasefire with Tehran was “over”.

Erm, I thought Iran had suspended the second phase of the talks…which were on the nuclear “deal” and I had earlier thought was what the “technical talks” were trying to advance, even though that would be contrary to the MOU position that all the obligations in it needed to be met before proceeding to the second phase. So color me confused.

For another view, Daniel Davis cites Suliman Ahmed who reports that Iran source (as face to face in Iran) have told him that Iran is readying a very big strike, meaning out of proportion to the earlier tit-for-tattish action:

From a lightly-edited machine transcript:

He [Suliman Ahmed] said that there is evidence and the people on the ground believe that Iran may be within 36 hours from the time he told me this this afternoon from launching a major strike against the west. Whether that’s the United States against the GCC countries or against Israel, he said they were being circumspect and weren’t clear. But he said he saw that in fact
the reason why he was not able to to come on the show today is because instead of going back to Tehran where he was going to get back in where they have relatively good internet he was not able to get on a plane because Iran had shut down all the airspace…

Ahmed also describes how most of the flags carried by people the crowd were predominantly the red flag of revenge, and that of the many people he spoke to from all levels of society, all wanted the war to go further. In keeping. At what I infer was the main ceremony in Tehran, only one speaker was booed, the president Pezeshian, who has been peace deal promoter in chief and is seeing as having sold Iran out in his role in getting the Memorandum of Understanding signed.

This tweet does not speak to timing but firmness of intent:

Another rumor, but query why the Kurds would be a priority now since many commentators have claimed they recognize that attacking Iran on behalf of the US and Israel is not a bright move:

In addition, global energy stocks look to be taking a further hit due to Russia halting diesel exports. As readers know well, despite the US fixation on gas prices, it is diesel that runs economies: trucks, tractors, forklifts. I must confess due to listening to Alexander Mercouris and more recently, Philip Pilkington, discounting the Ukraine noise-making about the harm that their drone strikes that I did not take the idea that they might be much more than a nuisance to heart. Refineries are huge and sturdy facilities and so the argument was that they would be hard to damage in a serious way, but the strikes can produce impressive fires and smoke. Readers who have been following this campaign are encouraged to speak up. Perhaps Ukraine has gotten better at targeting important and vulnerable parts of these refineries, so that former interruptions of hours or a could of days are more like a week or two. Or perhaps this is “a difference in degree is a difference in kind” with so many facilities needing what would normally be no big deal repairs that critical parts or specialist personnel are in short supply.

With that long caveat, from the Financial Times in World faces growing diesel supply crunch as Russia cuts off exports

Global diesel supplies are heading for a fresh crunch as Russia’s ban on exports adds to strains caused by the Iran war, risking higher prices for motorists and farmers and threatening efforts to curb inflation. 

Storage levels were already running low before Russian President Vladimir Putin blocked supplies from the world’s second-largest diesel exporter, in a tacit acknowledgment of Ukraine’s newfound success in launching long-range drone attacks on refineries….

Shipments of diesel and other products through the Gulf have again slowed to a trickle, due to the threat of further Iranian attacks in the Strait of Hormuz.

The double hit to diesel supplies saw wholesale prices in Europe soar, with their premium to crude oil reaching a high of $60.70 a barrel on Wednesday, as traders rushed to get their hands on tightening supplies.

That means that despite the recent drop in crude oil, which has fallen back from highs of more than $100 a barrel during the Iran war to about $70 today, diesel is still trading closer to $135 a barrel, meaning motorists are not seeing the drop in crude feed through to forecourts….

Neil Crosby of the energy data company Sparta said that the Russian ban could result in shortages in places such as Africa, Latin America and south-east Asia, which may have less buying power than Europe and the US. 

Russia typically exported about 700,000 to 800,000 barrels per day of diesel, much of it going to Brazil and Turkey after Europe shunned its supplies following Russia’s full-scale invasion of Ukraine in 2022. 

Moscow had already lowered seaborne diesel exports, cutting them in June to about 260,000 barrels per day — the lowest monthly level in at least a decade, according to analytics company Kpler. 

 

More from Twitter, admittedly with a pro-Ukraine slant:

From the body of the tweet:

Gasoline, diesel and jet shortages are now emerging simultaneously. With multiple crude distillation units (CDUs) knocked out across the refinery system, there is no quick path to restoring refining capacity. Sustained product imports are becoming Russia’s only viable medium-term solution.

Good luck with that. Belarus’ Mozyr refinery is the Kremlin’s best hope for securing up to 90kbpd of gasoline and a bit of jet and diesel. But it sits just across the Ukrainian border and is itself an obvious strategic target – expressis verbis by @ZelenskyyUa

.

On Qatar having to cut back its production increase plans, from Bloomberg in Qatar Pauses Push to Ramp Up LNG After Hormuz Tanker Attack:

Qatar is pausing efforts to rapidly revive production at the world’s largest liquefied natural gas facility after an attack on one of its tankers in the Strait of Hormuz raised fears that transit through the crucial waterway is still too risky.

QatarEnergy officials held a series of meetings following the attack on Tuesday, with Chief Executive Officer Saad Al-Kaabi deciding to cease plans to increase output at the Ras Laffan complex, according to people familiar with the matter. Operations will be kept at a minimum for safety reasons and the number of vessels scheduled to dock at the plant in the coming days will be reduced, some of the people said…

The pause is one of the most high-profile fallouts of the heightened tensions this week with attacks on a number of ships near Hormuz and the US striking Iran for two consecutive days…

Pushing back Ras Laffan’s ramp-up threatens to further tighten the global gas market, risking more intense competition between Asia and Europe for spare supply as they restock for the coming winter. Asian LNG spot prices are more than 80% higher than pre-war levels, highlighting anxiety surrounding the restart of Qatar — which supplied about a fifth of the world’s LNG last year.

European benchmark gas prices jumped on Thursday, topping €50 a megawatt-hour for the first time since the US and Iran signed an interim peace agreement last month….

Qatar had increased loadings and brought back empty tankers to take on more fuel, the people said. Eleven empty LNG vessels are currently sitting outside Ras Laffan, according to ship-tracking data.

And some tidbits. This helps explain China’s willingness to draw on oil reserves:

Done for today! Let us hope we have a quiet weekend and I do not see you on the Iran beat until Monday.

___

1 We mentioned Oman’s stance in yesterday’s post but in case you missed it:

More from from Arya Yadeghaar (Backup) on Twitter:

Oman’s MFA told the UN shipping agency that it doesn’t support imposing transit fees in the Strait of Hormoz.

“The Sultanate of Oman reiterates that the right of transit passage through straits used for international navigation is guaranteed under international law,”

“Oman remains fully committed to these legal principles and does not support the imposition of transit fees on vessels passing through the Strait of Hormoz.”

Transit passage is the regime stipulated in UNCLOS, which Oman signed. It is also the regime the US and Gulf states want to restore.

2 This concern may seem pedantic, but in the US contract framework (and Robert Pape has stressed that the Trump team sees the negotiations as a business deal), it is typical for courts to interpret ambiguous sections to the disfavor of the party that provided them.

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4 comments

  1. LawnDart

    There is admittedly a mini-pause on, but that may well be due to… Khamemi’s funeral?

    Re; Oman rejects fees:

    Oman has disqualified itself with its rejection of transit fees…

    Omani Foreign Minister Badr bin Hamad Al-Busaidi insisted that there would be no transit fees, but he did not rule out fees for navigational, environmental, or other “services…“

    https://www.instituteforenergyresearch.org/international-issues/iran-and-oman-want-to-charge-fees-for-services-through-the-strait-of-hormuz/

    Iran’s nuclear plans, via al Mayadeen:

    Rezaei asserted that if the United States launches a full-scale attack on Iran, Tehran could withdraw from the Nuclear Non-Proliferation Treaty (NPT) and would also consider changing its nuclear doctrine if it perceives an existential threat.

    [Ebrahim Rezaei, spokesperson for the National Security and Foreign Policy Committee of Iran’s Parliament]

    https://english.almayadeen.net/news/politics/iran-warns-us-gulf-allies-to–watch-their-oil-wells–amid-te

    We don’t want to build the bomb, but…

    Reply ↓
    1. Yves Smith Post author

      In the second quote from Oman, it is very clearly sticking to UNCLOS. UNCLOS requires any fees to be proportional to services actually rendered. So no charging massive fees and saying they are for environmental services.

      See also:

      Reply ↓
  2. KD

    It seems obvious in a sense that Iran has just gone through this 6-day mourning ritual of their beloved martyred leader and his grand-daughter, with mobs of people on the streets with red flags calling for the death of Trump and burning Trump in effigy, culminating on Friday, the Islamic Prayer Day. . . and Iran not taking this explosion of popular anger and nationalism and not striking back hard. You don’t have an epic pep rally and then cancel the football game.

    This funeral was engineered by the Iranian regime to mobilize popular sentiment for a reason, and its hard to believe they are just going to hit Bahrain with a couple of missiles. I suspect they are going to send a “game on” message to the West, basically f#$% your negotiations.

    How they strike is an interesting question. The economic weapon is more powerful than kinetic strikes with respect to America. But maybe they start sinking some ships, including US naval ships. It sounds like the Houthi’s are getting ready to go back to war with the Saudi’s so maybe we’ll see the Bab Al-Mandeb closed soon. I would predict an escalation from the Iranian side, and it will include further economic damage to regional shipping. I suspect the Iranians are smart enough that they will hold back a bit, so they still have some capacity to threaten further potential escalation in the future, but it will be something big and so far unseen.

    Reply ↓

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