March 13, 2014 By Sara Noble
China is warning the West to not impose sanctions on Russia because “sanctions could lead to retaliatory action, and that would trigger a spiral with unforeseeable consequences.”
Jedidiah Noble, who is not a geo-political strategist – he’s actually an engineer – predicted exactly this. If Jedidiah can make these predictions, why is it Mr. Obama can’t?
Mr. Obama has done little to stop Putin from rebuilding the Soviet Union. Putin remains in Georgia and has overtaken Crimea with barely-disguised Russian troops slipping in and out of the iron curtain they have erected between Ukraine and Crimea.
Yesterday, in a press conference with Ukraine’s PM, Mr. Obama gave Crimea away without even a whimper.
Mr. Obama gave away the missile defense shield and got nothing in return. He has drawn red lines and drawn lines without calling them red lines, but has done nothing retaliatory except move the line back.
China has been a menace to Japan and is threatening to take over sixteen islands in the East China Sea. The islands have value for their fisheries but mostly it’s a power grab by China and it will give China a strategic advantage in any military conflict. Mr. Obama has done little to nothing to support Japan.
When Russia moved into Crimea, Mr. Putin spoke with China’s leaders. He allegedly worked out some sort of deal. One can be sure that China’s imperialistic vision is part of the deal.
Russia used the imaginary threat to Russian populations living in Crimea as an excuse to go into Crimea once freedom fighters overturned the government in Ukraine. Now one can expect China to use an imaginary allegiance to Russia as an excuse for taking further steps.
In addition to our facing land grabs, we are in trouble economically if Russia and China join forces. We are deeply in debt to both Russia and China to say nothing of the fact that our dollar is threatened as the world currency.
China responded to the West threatening Russia with sanctions in this way: ”We don’t see any point in sanctions,” said Shi Mingde, China’s Ambassdor to the EU. “Sanctions could lead to retaliatory action, and that would trigger a spiral with unforeseeable consequences. We don’t want this.”
The sanctions are only travel bans and asset freezes on people and companies accused by Brussels of violating the territorial integrity of Ukraine.
Russia’s Deputy Economy Minister Alexei Likhachev responded by promising “symmetrical” sanctions by Moscow.
Mr. Obama is allegedly speaking with Beijing and working on a deal but there is no sign there will be a result favorable to the U.S. Mr. Mingh’s statement is a warning, but then again who could see that coming.
Can we even survive two more years of Mr. Obama?
Remember to vote in November!
(Reuters) – China’s main newspaper accused Western countries of stirring civil war in Syria and two Iranian warships docked at a Syrian naval base, underscoring rising international tensions over the near year-long crisis.
Despite pursuing a sustained military crackdown on the opposition in cities across the country, President Bashar al-Assad forged ahead with plans to hold a referendum at the end of the week.
Activists in the western city of Hama said troops, police and militias had set up dozens of roadblocks, isolating neighborhoods from each other.
“Hama is cut off from the outside world. There is no landlines, no mobile phone network and no internet. House to house arrest take place daily and sometimes repeatedly in the same neighborhoods,” an opposition statement said.
Government troops extended their control on Hama after an offensive last week that concentrated on northern neighborhoods on the edge of farmland that have provided shelter for Free Syrian Army rebels.
The rebel fighters have been attacking militiamen, known as shabbiha, while avoiding open confrontations with armored forces that had amassed around Hama.
Government forces also maintained their siege of pro-opposition neighborhoods of Homs, south of Hama on the Damascus-Aleppo highway. Opposition activists reported sporadic morning shelling of Baba Amro district.
Security forces also mounted a campaign of arrests and raids in two suburbs of Deraa city and loud gunfire was heard, activists said. The reports could not be independently verified.
The Monday actions followed a weekend which saw one of the biggest demonstrations yet in the capital as the pro-democracy uprising against Assad’s 11 year-rule neared its first anniversary.
Security forces have killed at least 5,000 people, according to human rights groups, in a campaign to crush the revolt while the Assad government says it has lost more than 2,000 soldiers and security agents in what it describes as a struggle against foreign-backed terrorists,
The conflict has also pitted Western and Gulf-led Arab powers against Assad allies Russia, China and Iran.
The former have condemned Assad for the bloodshed and called for him to step down. Beijing and Moscow say all sides are to blame for the violence and the crisis should be resolved through talks, not foreign intervention.
China’s Communist Party mouthpiece the People’s Daily, in a front page commentary on Monday, said: “If Western countries continue to fully support Syria’s opposition, then in the end a large-scale civil war will erupt and there will be no way to thus avoid the possibility of foreign armed intervention.”
A Chinese envoy met Assad in Damascus on Saturday and backed his plan to hold a referendum this coming Sunday on a new constitution which would lead to multi-party parliamentary elections within 90 days.
Syria’s official SANA news agency said about 14,600,000 people throughout the country were eligible to take part in the referendum. The West and Syrian opposition figures have dismissed the plan as joke, saying it is impossible to have a valid election amid the continuing repression.
Assad has ruled Syria for 11 years after succeeding his father Hafez on his death. The Assad family belongs to the Alawite sect, an offshoot of Shi’ite Islam, in a majority Sunni country, and there are fears the uprising could break down into a full sectarian conflict.
Meanwhile two Iranian naval ships docked at the Syrian port of Tartous on Saturday, Iran’s state-run Press TV reported. The ships were said to be providing training for Syrian naval forces under an agreement signed a year ago.
Iranian Defence Minister Ahmad Vahidi, quoted by the semi-official Fars news agency, said: “Our ships passed through the Suez canal and it is Iran’s right to have a presence in international waters.”
likely to add to Western concerns that the Syria crisis could boil over into a regional conflict if it not resolved soon.
Foreign ministers at a G20 industrialized and emerging nations meeting in Mexico were increasingly worried about whether a peaceful solution could be found.
“There is grave concern about the fact that existing structures of the United Nations have not delivered an outcome,”
Australia’s foreign minister, Kevin Rudd, told reporters in Los Cabos, Mexico.
The West has ruled out any Libya-style military intervention but the Arab League, led by Saudi Arabia, has indicated some of its member states were prepared to arm the opposition.
In Washington the senior U.S. military officer, General Martin Dempsey, said intervening in Syria would be “very difficult” because it was not like Libya.
Syria’s army is very capable, with a sophisticated, integrated air defense system and chemical and biological weapons, Dempsey said. It was also not clear who or what the fragmented opposition was exactly, he said.
A so-called “Friends of Syria” conference is scheduled to take place in Tunisia this Friday, bringing together Western and Arab powers.
Australia’s Rudd said the group aims “to place maximum pressure on president Assad to go, to end the butchery that we see day by day unfolding in Syria and to make sure we have a durable and peaceful political transition.”
(Additional reporting by Khaled Yacoub Oweis in Amman, Parisa Hafezi in Tehran; Susan Cornwell in Washington; Krista Hughes in Los Cabos, Mexico; Editing by Giles Elgood)
- Chinese newspaper accuses west of provoking civil war in Syria – The Guardian (guardian.co.uk)
- Syrian security forces increase pressure on Damascus protesters (guardian.co.uk)
- Syria’s Civil War Rages, as Alawites Press on (mideastconflicts.wordpress.com)
- Whose War is it in Syria? Al-Qaeda Distorts Field as Big Powers Stand Divided (ibtimes.com)
- Peter Goodspeed: Syrian civil war impossible to contain within its borders (fullcomment.nationalpost.com)
- Syrian gunmen kill judge and prosecutor (guardian.co.uk)
By Ayesha Daya
Feb. 14 (Bloomberg) — Iran might respond to sanctions with “low-level provocation” such as slowing shipping through the Strait of Hormuz, keeping oil prices at their currently high level, according to three Standard & Poor’s reports.
Iranian authorities could disrupt supplies of oil from the Persian Gulf by imposing tanker inspections or boarding merchant ships in its territorial waters, supporting oil prices because markets would increasingly view armed conflict as “a real, if remote, possibility,” according to the reports’ authors, who include Paris-based Jean-Michel Six, S&P’s chief economist for Europe.
The likelihood of severe disruption of oil supplies through the strait, through which 20 percent of the world’s oil flows, is “very low,” though if one did occur, it might boost oil to $150 a barrel and push economies into a recession, according to the reports.
“For oil-producing sovereigns of the Gulf Cooperation Council — Saudi Arabia, U.A.E., Qatar, Kuwait, Oman, and to a lesser extent, Bahrain — higher oil prices would actually be beneficial,” said Elliot Hentov, an S&P credit analyst in Dubai. “As oil exporters, they would receive more foreign earnings that they could either use to stimulate demand or improve their government’s balance sheets.”
The U.S. and the European Union are imposing tougher sanctions on Iran and Israel has talked of an attack on the Islamic Republic’s nuclear facilities in an attempt to halt its atomic program. Iran, which says its nuclear program is for civilian purposes, has threatened to block the Strait of Hormuz in retaliation.
The three S&P reports discuss the impact of rising Gulf tensions on Middle Eastern states seeking to borrow money, the risks that a closure of Hormuz would pose for companies looking for credit and the threats to global economic growth from an oil shock.
- Iran ‘definitely’ closing Strait of Hormuz over EU oil embargo (mb50.wordpress.com)
- Iran To Practice Closing Strait Of Hormuz (mb50.wordpress.com)
- Iranian Diplomat: “we don’t have the intention to close the Strait of Hormuz” (gcaptain.com)
- Iran prepares suicide bomb boats in Gulf: US Navy (nation.com.pk)
Feb. 13 (Bloomberg) — Sanctions on Iran are tightening after Overseas Shipholding Group Inc., Frontline Ltd. and owners controlling more than 100 supertankers said they would stop loading cargoes from the Organization of Petroleum Exporting Countries‘ second-largest producer.
OSG, based in New York, said Feb. 10 that the pool of 45 supertankers from seven owners in which its carriers trade will no longer go to Iran. Four OSG-owned ships, managed by Tankers International LLC, called at the country’s biggest crude-export terminal in the past year, ship-tracking data compiled by Bloomberg show. Nova Tankers A/S and Frontline, with a combined 93 vessels, said Feb. 9 and 11 they wouldn’t ship Iranian crude.
Previous efforts to curb Iran’s oil income and stop it from developing nuclear weapons failed because the structure of the shipping industry means vessels are often managed by companies outside the U.S. or European Union. An EU embargo on Iranian oil agreed to Jan. 23 extended the ban to ship insurance. With about 95 percent of the tanker fleet insured under rules governed by European law, there are fewer vessels able to load in Iran.
“It’s the insurance that’s completed the ban on trading with Iran,” said Per Mansson, a shipbroker for 31 years and managing director of Norocean Stockholm AB, which handles tanker charters. “Last summer, many countries started to be a little bit tougher, but the insurance is the real trigger.”
OSG’s Overseas Rosalyn, which can carry about 2 million barrels, arrived at Kharg Island on Jan. 27 and departed the next day, tracking data compiled by Bloomberg show. It left about 16 feet deeper in the water, an indication it loaded cargo. The vessel is managed by Tankers International, which has its head office in Cyprus. OSG complies with all U.S. and European laws and its headquarters in New York doesn’t manage charters, OSG Chief Executive Officer Morten Arntzen said in an e-mail Jan. 30.
Tankers International told owners the pool’s vessels will no longer sail to Iran after changes to EU regulations, Arntzen said in a Feb. 10 e-mail. Insurers are no longer able to cover vessels trading in the Persian Gulf nation, he wrote.
Ship owners sometimes group their vessels to coordinate charters and improve earnings. The Tankers International pool operates 45 very large crude carriers, or VLCCs, from OSG and six other companies, including Antwerp-based Euronav NV and St. Helier, Channel Islands-based DHT Holdings Inc.
“All the owners in the pool have stated that they will not trade Iran because of the consequences,” DHT CEO Svein Moxnes Harfjeld said by phone Feb. 10. “DHT is complying with all relevant regulations and sanctions, and following recent developments our vessels have been instructed not to trade Iran.”
Frontline companies including Hamilton, Bermuda-based Frontline Ltd. and Frontline 2012 won’t ship Iranian crude, Jens Martin Jensen, chief executive officer of Frontline Management AS, said by e-mail and phone on Feb. 11 and 12. Frontline operates 43 VLCCs, according to its website.
Nova Tankers, the Copenhagen-based operator of a pool of ships including vessels owned by Mitsui O.S.K. Lines Ltd., won’t load Iranian crude because of European sanctions, Managing Director Morten Pilnov said by phone from Singapore on Feb. 9. The pool will have about 50 vessels by the end of this year, according to data on its website.
Nippon Yusen K.K., the second-largest owner of VLCCs, won’t carry Iranian oil if it means ships aren’t insured, Yuji Isoda, an investor relations manager for the Tokyo-based company, said Feb. 9. The company doesn’t yet know how its insurers will handle the EU sanctions, he said by phone.
U.S. and EU leaders are trying to tighten restrictions on business with Iran, which produced 3.55 million barrels of crude a day in January, 11 percent of OPEC’s total, according to data compiled by Bloomberg. Oil sales earned Iran $73 billion in 2010, accounting for about 50 percent of government revenue and 80 percent of exports, the U.S. Energy Department estimates.
The United Nations has imposed four sets of sanctions on Iran, and the International Atomic Energy Agency said in November the country had studied making an atomic bomb. The government in Tehran says its nuclear program is for civilian purposes and that documents held by the IAEA purporting to show designs and tests of weapon components are fakes.
Iran has threatened to block shipments through the Strait of Hormuz in the Persian Gulf, through which about 20 percent of the world’s globally traded oil passes. Crude futures in New York advanced 32 percent to $100.19 a barrel since Oct. 4.
More trade with Iran may be blocked if a bill approved Feb. 2 by the U.S. Senate Banking Committee becomes law, making U.S. companies responsible for the actions of their foreign units when dealing with Iran. A spokesman for committee chairman Tim Johnson, a South Dakota Democrat, declined to comment.
While the Japanese government said last month it would curb imports from Iran, India’s Foreign Secretary Ranjan Mathai said Jan. 17 his country wouldn’t. China, the Persian Gulf country’s largest customer, needs the oil for development, Vice Foreign Minister Zhai Jun told reporters Jan. 11.
Founded in 1948, OSG has 111 vessels and 3,500 employees, according to its website. Its biggest shareholders include the family of board members Oudi and Ariel Recanati, who control about 10 percent, data compiled by Bloomberg show. Oudi Recanati is an Israeli citizen and Ariel Recanati is a U.S. citizen, according to a Sept. 6 filing with the Securities and Exchange Commission. Charles A. Fribourg sits on the board of OSG and Continental Grain Co., the data show.
Shares of OSG, which has 14 supertankers, fell 71 percent in the past year as a glut of vessels drove down transport rates. The company will report a loss of $178.6 million for this year, down from $204.4 million for 2011, according to the median of five analyst estimates compiled by Bloomberg.
Three other OSG vessels from the Tankers International pool called at Kharg Island in the past year, data compiled by Bloomberg show. They fly the Marshall Islands flag, which means they are registered there for regulatory purposes, according to data on the website of International Registries Inc. Almost 9 percent of the tanker fleet is flagged in the Marshall Islands, behind Panama and Liberia, according to data compiled by London- based Clarkson Plc, the world’s biggest shipbroker.
“Ship owners and brokers are now seeing a tightening of sanctions,” said Bob Knight, managing director of tankers at Clarkson in London. “This is a sign that sanctions are starting to bite.”
–With assistance from Michelle Wiese Bockmann and Rob Sheridan in London. Editors: Dan Weeks, Sharon Lindores.
- OSG Says Tanker Pool Will Halt Iran Trade After Sanctions (businessweek.com)
- Another Shipping Bankruptcy Filing Could Signal More on the Way (GMR, ONAVQ, TNK, OSG, NAT, FRO, NM, DRYS) (247wallst.com)
- Despite Sanctions by EU & US, Irani Black Gold Turns into 24K Gold (jafrianews.com)
- Iran threatens to stop Gulf oil if sanctions widened (mb50.wordpress.com)
Sanctions imposed against Iran will not affect the IP gas pipeline project and therefore Pakistan will continue to pursue it, Pakistan’s Minister for Petroleum and Natural Resources Asim Hussain said.
He went on to say that, Pakistan is determined to complete the Iran-Pakistan gas pipeline despite the sanction imposed against Iran, IRNA reported.
According to a statement issued by Pakistan’s Ministry for Petroleum and Natural Resources, Pakistan needs to meet its energy demands immediately and for this, all options are to be availed.
Based on agreement between the two countries, Iran agreed to export 21.5 million cubic meters of natural gas daily, 7.8 billion cubic meters annually.
- Pakistan Wants IP Project on Fast Track
- Pakistan Requests More Iranian Gas
- Pakistan Says IP Gas Pipe Project Priority
- Iran-Pakistan Gas Pipeline Project to Boost Local Economy
- Chinese Companies Should Invest in Iran-Pakistan Gas Pipeline
- The Pakistan-Iran pipedream (therearenosunglasses.wordpress.com)
By Mitra Amiri and Robin Pomeroy
TEHRAN | Wed Jan 25, 2012 8:29am ES
(Reuters) – Iran increased bank interest rates on Wednesday and indicated it would further restrict sales of foreign currency, hoping to halt a spiraling currency crisis after new Western sanctions accelerated a dash for dollars by Iranians worried about their economic future.
“The economy minister has announced that (Iranian President Mahmoud) Ahmadinejad has agreed with the approval of the Money and Credit Council to increase interest rates on bank deposits to up to 21 percent,” the official IRNA news agency reported.
The central bank also told Iranians they should only buy dollars if they are travelling and not hoard them to guard against economic uncertainty.
New U.S. and European sanctions targeting Iran’s vital oil exports and its central bank seriously exacerbated a slide in the Iranian currency that was already under way, creating what one senior politician described as economic instability not even witnessed during Iran’s 8-year war with Iraq in the 1980s.
The West hopes the economic pressure will force Iran to curb the nuclear work they fear is aimed at making bombs but which Tehran says is entirely peaceful.
The rial started weakening after a decision last April to cut interest paid on bank deposits to a range of a 12.5-15.5 percent, below inflation which is currently around 20 percent, prompting many Iranians to withdraw savings and buy gold and foreign currency and pushing up the price of both.
The dash for those safe havens accelerated sharply after the new sanctions were announced, resulting in the rial losing 50 percent of its value against the price of dollars available on the open market in just one month.
Monday’s decision marks a policy U-turn for Ahmadinejad, who faces a political test in March 2 parliamentary election. He previously vetoed efforts by Central Bank Governor Mahmoud Bahmani to increase rates.
Bahmani indicated the rate increase would be accompanied by further restrictions on the sale of foreign currency.
“We will provide foreign currency in any amount for people demanding it for various uses,” he said in an interview published on the website of state broadcaster IRIB.
“Travelers, university students and patients will be supplied at an appropriate rate,” he said. Importers of vital goods would also be able to buy as much foreign currency as they need.
“The government will not give foreign currency for storage,” he added, implying that Iranians will no longer be allowed to exchange their rials for hard currency unless they can prove an immediate need.
The rial’s slide is a huge risk to already rising inflation as Iran is heavily reliant on imported consumer and intermediate goods whose prices have surged as the rial has depreciated.
“Government officials and the president himself should definitely be held accountable to people and public opinion.”
Ahmadinejad’s representative in parliament – which is already highly critical of the president and may become more so after March 2 – said the new policy would burst what he called the bubble of gold and dollar prices.
“The effects of the new decision will be clear in the market very soon and the bubbles being created for foreign currency and gold will be removed,” the ISNA news agency quoted Mohammad Reza Mirtajedini as saying.
The deputy head of parliament’s economics committee criticized the government for reacting late to the crisis which he said had “no reasonable, logical basis.”
“Increasing the bank deposit interest rates is an appropriate tool for people’s investments but doing it in a hasty manner and the current inflamed situation of the market will not solve any problem,” Mostafa Motavarzadeh told the semi-official Fars news agency.
The price of 8.133-gram gold coins dropped on the news, local media reported, to 8,500,000 rials, reversing most of last week’s 45 percent increase when the price rose to 10,100,000.
The effect on the price of dollars was negligible however with ISNA saying the price had fallen on the news to 22,500 rials from 23,000 rials – still double the central bank’s official “reference rate” of 11,293 rials.
However, exchange agencies contacted by Reuters said they had no dollars to sell, reflecting either a shortage of notes or a reluctance to sell in such a volatile atmosphere.
- Iran bans foreign currency trading on the street (seattlepi.com)
(Reuters) – European Union governments agreed on Monday to an immediate ban on all new contracts to import, buy or transport Iranian crude oil, a move to put pressure on Tehran‘s disputed nuclear program by shutting off its main source of foreign income.
However, to protect Europe’s economy as it battles to overcome a debilitating debt crisis, the governments agreed to phase in the embargo, giving countries with existing contracts with Iran until July 1, 2012 to end those deals.
At a meeting of foreign ministers in Brussels, EU governments also agreed to freeze the assets of Iran’s central bank and to ban all trade in gold and other precious metals with the bank and other public bodies, EU officials said.
Western powers hope the far stricter sanctions net, which brings the EU more closely into line with U.S. policy, will force Iran to scale back or halt its nuclear work, which Europe and the United States believe is aimed at developing weapons. Iran says it is enriching uranium solely for peaceful purposes.
EU foreign policy chief Catherine Ashton said she wanted financial sanctions to persuade Tehran to return to negotiations with the West, which she represents in talks with Iran.
“I want the pressure of these sanctions to result in negotiations,” she told reporters before the ministers met.
“I want to see Iran come back to the table and either pick up all the ideas that we left on the table … last year … or to come forward with its own ideas,” she said.
Tehran says its nuclear program is necessary to meet its rising energy needs, but the United Nations’ International Atomic Energy Agency said last year it had evidence that suggested Iran had worked on designing a nuclear weapon.
EU sanctions follow fresh financial measures signed into law by U.S. President Barack Obama on New Year’s Eve and mainly targeting the oil sector, which accounts for some 90 percent of Iranian exports to the EU. The European Union is Iran’s largest oil customer after China.
Economic considerations weighed heavily on EU preparations for the embargo in recent weeks because of the heavy dependence of some EU states on Iranian crude. Greece, which is at the heart of the debt crisis, is almost entirely dependent on Iranian oil. It must now seek alternative sources.
Diplomats will return to the issue of oil sanctions before May, officials said, to assess whether the measures are effective and whether EU states are succeeding in finding sufficient alternative resources.
Saudi Arabia, Kuwait and other oil-rich states in the Gulf are expected to increase their output of crude oil to offset the loss of access to Iranian exports.
“There will be a review of the embargo before May,” one EU official said. The review could potentially affect the date when the full ban takes effect, diplomats said.
Greece, which depends on financial help from the EU and the International Monetary Fund to stay afloat, gets nearly a quarter of its oil from Iran, thanks to favorable financing terms from Tehran.
“The financial situation of Greece at the moment is not the brightest one, and rightly they are asking us to help them find a solution,” a senior EU official told reporters on Friday.
With a significant part of EU purchases of Iranian oil covered by long-term contracts, the grace period will be an important factor in the effectiveness of the EU measures.
The unprecedented effort to take Iran’s 2.6 million barrels of oil per day of exports off international markets has kept global prices high, pushed down Iran’s rial currency and caused a surge in the cost of basic goods for Iranians.
(Additional reporting by Adrian Croft in London and Sebastian Moffett in Brussels; Editing by Luke Baker and)
- EU firms renew Iran oil deals to win sanction reprieve (mb50.wordpress.com)
- EU governments consider delay on any Iran oil ban – Reuters (reuters.com)
- Iran warns Arabs not to fill oil supply gap (thehimalayantimes.com)
- EU Officials Try to Agree on Iran Oil Embargo – Fox News (foxnews.com)
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.”
Graphic on Iran’s oil exports: link.reuters.com/pyw35s
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.
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
“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.
- Iran plans more war games in strait as sanctions bite (mb50.wordpress.com)
- Japan ‘to reduce oil imports from Iran’ (telegraph.co.uk)
- PressTV: Russia rejects Iran oil sanctions (jhaines6.wordpress.com)
- PressTV: Russia warns EU over Iran oil sanctions (jhaines6.wordpress.com)
- EU mulls Iran sanctions (laaska.wordpress.com)
- World oil prices rally on Iran, Nigeria concerns (vanguardngr.com)