Author: Elmira Teriverdiyeva, Baku. Exclusively for VK
By insisting that Europe impose an oil embargo on Iran, Washington puts the EU in predicament which may cause serious repercussions for the West.
The US is ready to convince Europe and even Asia on the need for the embargo, The New York Times said. At this point, they are only discussing a reduction of purchases, yet, bearing in mind the long-lasting struggle of the US with the Iranian authorities, this is unlikely to be the limit of the conflict. US Secretary of the Treasury Timothy Geithner, according to publications this week, will hold talks in Beijing and Tokyo.
In the conflict over the Iranian nuclear program, the European Union, encouraged by the US, plans to pressurize the Iranian government by imposing an oil embargo. EU members approved the ban on oil imports from Iran in Brussels on January 4, Reuters reports. The EU decision to pass sanctions was made after the US, UK and Canada had announced unilateral sanctions against Iranian energy and financial sectors of economy on November 21. France proposed unprecedented sanctions such as freezing assets of the Iranian Central Bank and stop purchasing Iranian petroleum.
The new sanctions were inspired by a report of the IAEA, stating that Iran has been developing nuclear weapons before 2003. The US, Israel and a set of Western states suspect Iran of developing nuclear arms. Tehran insists that the nuclear program has peaceful nature.
The terms of passing new sanctions and their content have not been fully clarified. Diplomats say that most EU states want the oil embargo to be imposed immediately, some want it only in a few months.
Protraction of some EU members is understandable – the oil embargo against Iran will cause harm to Europe itself, especially Greece, Spain and Italy, already suffering from crisis of the euro zone. 13% of Italian oil imports come from Iran (183,000 barrels daily), Spain – 13% (137,000 barrels daily), Greece – 14% (20,000 barrels). Iran was providing Europe with a total of 450,000 barrels of oil daily in January-June 2011. Moreover, EU sanctions put many petroleum companies into a complicated situation with the need to find balance between fulfilling Washington’s sanctions and maintaining ties with the energy sector of Iran, the second largest petroleum exporter after the Organization of Petroleum Exporting Countries.
Realizing the risks, some European states, especially the ones receiving oil from Iran directly, are trying to drag imposition of the embargo. Italian Prime Minister Mario Monti said that his state would support the sanctions, but the embargo should be imposed gradually and should not affect oil shipments Iran uses to pay off debts to the Italian energy concern Eni. If the US and major European players continue insisting on support of sanctions by all EU states, they would need offer an equal exchange to Italy, Spain and Greece, which currently suffer from financial problems.
The export vacuum occurring from the ban on Iranian petroleum would most likely be compensated by oil from Saudi Arabia, Qatar, Kuwait and some African states that agreed to increase oil production for global markets after imposition of the embargo. It is still clear that even in this case the world prices would not rocket immediately. Firstly, because Tehran, being in a complicated condition due to earlier sanctions, offered to sell oil at more beneficial conditions for importers. Secondly, Iran may form a situation when oil prices would not just increase, but hit a critical benchmark. This is why Tehran needs to realize its threats to blockade naval transport of petroleum through the Hormuz Strait, used to transport oil from the Gulf. If the embargo should be imposed, the Iranian government, which would have nothing to lose at that point, would indeed close the strait and cause dreaded repercussions for importers and exporters of oil.
If Iran does close the Hormuz Strait, a naval route used for transport of a fifth of world oil supplies, the prices for oil would increase by at least $50 per barrel. Such dramatic rise of prices would be critical for EU economies weakened by the crisis.
Blocking the strategic strait would not only become a problem for Europe, it would also affect China, the main oil partner of Iran purchasing petroleum from the Gulf. Damage would also be inflicted to other exporters of the Middle East, such as Saudi Arabia, Qatar and the United Arab Emirates, which also use the strait. Although all the mentioned states have reserve oil pipeline, but oil transport would become more costly, nonetheless.
Iran does not fear military confrontation with the US if the embargo is imposed. Tehran has nothing to lose indeed. Iran planned to make $100 billion from oil exports in 2011 for the first time. Its income covers up to 80% of the budget in Iran. This is why Europe’s ban on Iranian oil, notedly on the threshold of parliamentary polls, may escalate the domestic political situation in Iran, making official Tehran almost fearless.
