Europe prepares oil imports embargo on Iran

Posted on December 1, 2011

Europe has moved towards imposing an oil embargo on Iran, intensifying the pressure on Tehran to abandon its suspected nuclear weapons programme.

Meeting in Brussels, European Union foreign ministers started working on an embargo, saying they had “agreed to broaden existing sanctions” and were examining “measures aimed at severely affecting” Iran’s financial and energy sectors.

Oil industry executives and diplomats said the EU was likely to back an embargo by its next meeting in January.

Iran is the world’s third largest oil exporter. Executives and officials said Italy, Spain and Greece – the biggest buyers of Iranian oil in Europe – had dropped their opposition to an embargo but had asked for time to find alternative supplies.

“We are going to work on it,” Alain Juppé, the French foreign minister said. “Greece expressed some reservations and we are going to take them into account.”

The US stopped importing ­Iranian oil in 1987 and has successfully pressured most European companies, including Total of France and Royal Dutch Shell, to stop investing in the country’s energy sector.

The EU bought 450,000 barrels a day of Iranian crude last year, about a fifth of its exports. Italy and Spain accounted for 70 per cent of EU oil imports from Iran.

Western diplomats said one of the key questions for European countries in the weeks ahead would be whether Saudi Arabia and other Gulf states could be persuaded to boost oil production to mitigate the effects of an EU oil embargo.

“Iran is not the only oil producer in the world and there are certainly some states who are on bad terms with Iran who might be persuaded to guarantee supplies,” a diplomat said.

A senior oil executive from a top importer of Iranian oil said refineries would talk to Middle Eastern nations about extra supplies. The executive said that European countries could tap strategic oil reserves as a bridge until new supplies arrived.

Michael Wittner, oil analyst at Société Générale in New York, said embargo talk would push up oil prices. “The last thing Europe wants is to trigger a price spike so clearly it needs to co-ordinate with Saudi Arabia.”

Brent crude, the global benchmark, traded on Thursday at $108 a barrel.

The EU also added another 37 Iranian officials and 143 entities linked to the country’s nuclear programme to an existing sanctions list, freezing their assets and banning their travel. The measures follow the release of a UN nuclear agency report last month which for the first time detailed Tehran’s efforts at weaponisation and said the Islamic Republic had sought to design a nuclear warhead.

The discussion about an oil embargo on Iran took place amid simmering anger in European capitals over an attack earlier this week on the British embassy in Tehran. In a toughly worded statement, the ministers said they were “outraged” and promised further “appropriate measures” in response.

Catherine Ashton, the EU’s high representative, declined to specify what those might be, but several member states, including Germany and France, have responded to the UK’s appeal for solidarity by recalling their own ambassadors. “We have received a great deal of solidarity and received very strong unity in the EU,” William Hague, the UK foreign secretary, said after the meeting.

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