Category Archives: Greece

Greece is a country in southeastern Europe.

Iran cuts oil exports to six EU countries

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Iran has stopped crude supplies to Spain, Italy, France, Greece, Portugal and the Netherlands, reports Iran’s Press TV.

­Tehran has fulfilled its threat to retaliate for the EU’s oil embargo, agreed by the bloc on January 26. The sanctions gave the EU members time till July to find new suppliers.

Officials within Iran immediately called to cork the black gold stream to Europe, targeting economies weakened by the ongoing financial crisis. On Wednesday, these calls became reality.

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Embargo On Iranian Oil Delayed By Six Months

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Eric Platt

A European Union embargo on Iranian oil will likely be delayed by six months, Bloomberg‘s Thomas Penny reports.

The E.U. is holding for countries including Italy, Greece and Spain to find alternative sources.

New York oil prices have fallen 1.8% on the news.

Iran is the second largest OPEC oil producer, with 3.6 million barrels recovered per day last month.

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EU firms renew Iran oil deals to win sanction reprieve

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By Ikuko Kurahone and Dmitry Zhdannikov

(Reuters) – Italian, Spanish and Greek companies have extended most of their oil supply deals with Iran for 2012, so that most of Tehran’s supplies to the European Union are likely be exempted from sanctions for at least the first half of the year.

Trading sources told Reuters that Italy’s Saras (SRS.MI), ERG (ERG.MI) and Iplom, Greece‘s Hellenic (HEPr.AT) as well as Spain’s Repsol (REP.MC) have either extended or have not scrapped existing term supply contacts with Iran for 2012.

“We kept our 2-year deal with Iran,” said a trader with a refiner.

“At the moment it is business as usual, but of course we are considering potential alternatives. Asking the Saudis for more crude is one possibility,” said a trader with an Italian company.

Italy, Spain and Greece take some 500,000 barrels per day out of European Union’s imports of Iranian oil of around 600,000 bpd, according to the latest available data.

Diplomatic sources told Reuters the three countries, the EU’s most fragile economies, were pushing for a grace period for up to 12 months as an immediate switch to oil from other producers may prove too costly and painful for them.

Some diplomats said that when EU foreign ministers meet on January 23 to decide on sanctions, they will most likely agree on a compromise of six months for the grace period, and no longer.

Only existing deals would be granted that period while new or spot deals would not be exempted from sanctions.

European entities will also be allowed to continue receiving repayments in oil for debts they are owed by Iranian firms. These include Eni (ENI.MI) and Norway’s Statoil (STL.OL) to whom Tehran owes $2 billion and $0.5 billion respectively and pays in oil and petroleum gas (LPG).

“We expect a slow and gradual implementation of what will eventually become a full embargo,” said Mike Wittner from Societe Generale. “Europe has the same concerns about its fragile economy and an oil price spike as the U.S., probably even more.”

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Graphic on Iran’s oil exports: link.reuters.com/pyw35s

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Iran’s standoff with the West over its nuclear program has complicated Tehran’s oil exports and often prompts it to sell crude at steep discounts, appealing for struggling European refiners.

Most contracts are long-term annual supply deals and spot market sales are rare as U.S. sanctions against Iran make quick and smooth trade finance at banks almost impossible.

The EU is moving to impose sanctions at a time when the United States, which has banned Iranian oil imports since 1979, is acting to add Iran’s central bank to the sanctions list – a measure that will make it even more difficult to trade oil with Tehran, according to traders.

But even a full European oil embargo may not seriously weaken Iran, Its budget reaches breakeven with oil prices of just $81 per barrel as opposed to Thursday’s market level of

$114.

“If Iran is not able to send to other customers the oil that it would not sell to the EU, it could lose between 25-30 percent of its export volume but with oil prices 40 percent higher than its budget, it will probably not be enough to make a big difference for Iran,” said analyst Oliver Jakob of Petromatrix.

“To have an impact on Iran, the oil embargo needs to come together with much lower oil prices,” Jakob said. “What is required to have an impact on the regime is to have Iran lose a third to a half of its export volume and oil prices down to $60.”

LOOKING FOR ALTERNATIVES

U.S. officials have already travelled to China, South Korea and Japan to persuade Iran’s biggest customers in Asia to cut purchases. In Europe, real cuts will take time.

“A preliminary agreement hammered out by diplomats could be watered down before being signed by ministers. That is normally what happens in the EU in all spheres,” said Sam Ciszuk, a Middle East analyst at KBC Energy.

Diplomats and traders say the grace period would give European companies time to find alternative sources of crude, but the process would be far from smooth.

“Some (EU members) are saying: ‘help us find alternative suppliers and find a way to sustain the discounts we currently have’,” one diplomatic source said.

The problem of replacement supplies to Europe could be partially solved with the help of Saudi Arabia. European diplomats have spoken to the kingdom’s leadership who have signaled readiness to fill a supply gap, although concerns mount about the producer’s spare capacity nearing its limit.

But there is no reason why Riyadh would agree to supply crude at a discount to a buyer like Greece, traders said. Many in the oil market have already pulled the plug on supplies for fear that Athens might default on its debt.

Greek officials have said their country imports up to 40 percent of its oil from Iran and wants to continue the flow without disruption and on the same funding terms.

Italian refiner Saras said it received about 10 percent of its feedstock from the Islamic Republic in 2011.

“A ban on Iran exports would cause a shortage in heavy crude oils, putting further pressure on already high oil prices, and compressing margins for all refiners,” said Massimo Vacca, Saras’ head of investor relations.

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Bank run in Greece

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We got ourselves a new twist on an old-fashioned bank run! By gum, it’s been a while.

Spiegel is reporting that Greeks, anxious over their financial crisis and the possibility of being booted from the European Union, are raiding their savings accounts.

The story notes that since the start of 2010, Greek banks lost nearly 30 percent of their total savings amounts, with September and October seeing a combined loss of 14 billion euros.

Greeks are either living off those savings or sending it out of country.

Chris Quinn

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We Have Entered The First Of Four Phases That Will Bring The End Of Fiat Money

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John Browne, EuroPac

Last week, the G-20 meetings did not produce an expanded bailout fund for the eurozone. While this may bode well for the long-term solvency of the member-states (moral hazard and all), it has also triggered a market reaction that I expect to help destabilize the common currency. Wednesday’s market moves suggested that this development is good for the dollar and bad for gold. Allow me to step back from the stampeding herd to evaluate whether they are, in fact, moving in the right direction.

The argument for the dollar and against gold is simplistic, and I will evaluate it against the four-stage collapse I see ahead for the Western currencies.

Arguing that gold is a hedge only against inflation, and taking current inflation figures at face value, mainstream analysts have concluded that gold is grossly overvalued – that it may, in fact, be the latest asset bubble to arise. However, these analysts fail to account for why gold is a hedge against inflation: it is ultimately an insurance policy against runaway currency collapse. In other words, it’s intended as a longer-term, wealth-preserving purchase. Yes, some pit traders may be trying to make a quick buck shorting gold and going long on dollars, but for individual investors, following suit would leave them vulnerable to what may prove to be ahead. That is, a phased destabilization of the euro, leading to a possible collapse of the US dollar. In such circumstances, even today’s volatile prices for gold and silver would look attractive.

Phase One of the threatened catastrophe is sovereign debt crisis, which is effectively camouflaging a currency crisis. The Greek default is significant as the first crack in the dam. But Greece is a relatively small problem. The bigger threat is Italy, with its $2.4 trillion of debt and a 10-year bond yield having just surpassed the critical 7 percent level. This is the ruinous milestone at which the cost of new debt money surpasses the economic growth rate plus inflation. Italy faces massive debt refunding, falling buyer interest, and no hope of a bailout. If Italy were to default, it could threaten rapid contagion to Portugal, Ireland, Spain, and other larger eurozone countries, including perhaps France. In such an event, most international banks and institutional investors, including those in the US, could suffer severe, possibly total, losses on their holding of certain sovereign bonds. MFGlobal is but one speculative example of a looming secular trend. Worse still, the writers of credit default swap (CDS) derivatives, including many German Landesbanks (state-level banks) and major US banks, could suffer crippling losses.

This would lead to Phase Two of the collapse: a renewed and far larger banking crisis. This, in turn, could bring stock markets tumbling and threaten major institutional investors, including politically sensitive pension and insurance companies. In addition, banks would become extremely wary of lending to each other. Likely, the interbank market would freeze, but far more severely than in 2008. It could result in curtailed lending and even the recall of short-term corporate funding and call-loans. This could cause a dramatic spike in US bank failures. Unwary depositors who have failed to watch their banks closely could find their insured funds frozen, perhaps for months, as the FDIC reorganizes the problem banks – and perhaps even waits for its own bailout. This would add further downward pressure to economic growth.

Meanwhile, the cascading banking crisis would likely push Europe into a severe recession, even a depression. As the EU accounts for some 22 percent of world trade, a European depression would no doubt drag down the US even further. In response, the price of precious metals may face severe selling pressure as liquidity becomes paramount.

This would present an opportunity for long-term gold and silver investors.

Phase Three would be a restructuring or dissolution of the euro and possibly a stampede into the US dollar, sending its price and US Treasuries temporarily upwards. With a far stronger dollar, the price of most commodities, including precious metals, may fall temporarily in dollar terms. We are seeing a preview of this dynamic with today’s news on Italy.

However, to reallocate one’s portfolio in reaction to such a move could put an investor in jeopardy. That is because Phase Four, the most alarming, would be investors’ realization that the US dollar lies at the root of the international currency collapse and is itself vulnerable. Likely, this panic flight from the dollar would develop suddenly, and perhaps in undreamed of volumes. Doubtless, the speed and size of a stampede out of paper currencies and into precious metals will take many investors by surprise – just as the Credit Crunch in 2008 did. As the realization of currency catastrophe spreads, the price of silver may start to rise faster than even gold.

There’s an old saying that “the higher you fly, the harder you fall.” The US government is, by any measure, the luckiest government in centuries. It has risen to unforeseen heights of monetary excess – and has been rewarded for doing so. But it looks like lower flying planes are starting to stall out, and one can only imagine – from this height – how fast and how far the US may fall.

My humble advice is not to try to time it, but rather to use your golden parachute before it’s too late.

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