War Games Mask Worries at Home 1| IRAN An increasingly isolated Islamic Republic conducted a io-day naval exercise near the strategic Strait of Hormuz, a pivotal sea lane linking the Persian Gulf to the rest of the world. The Iranians tested a new naval cruise missile and used the occasion to issue a number of bellicose statements, warning the West, specifically the U.S., against meddling in Iranian waters and boasting of Iran's ability to seal off the strait-an act that would wreak havoc on global oil markets. Hobbled by a new round of international sanctions aimed at curbing its nuclear program, Iran has tried to puff out its chest while domestic woes continue to mount. The nation's currency, the rial, hit record lows against the dollar as worries about oil prices and the possible impact of new sanctions took their toll. And cracks have started to show within a panicked regime: the outspoken daughter of reform-friendly former President Ali Akbar Hashemi Rafsanjani was sentenced to six months in prison for "making propaganda" against the state. Meanwhile, Iran has offered to restart talks over its nuclear program, which it insists is peaceable. The U.S., though, is toughening its stance. On Dec. 29, it sealed a $30 billion arms deal with Saudi Arabia, Iran's chief regional adversary.
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