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Iran deprived of European outlet for its oil

(BRUSSELS2) In a few hours, on 1 July at 0h, not a drop of Iranian oil will have to enter the European Union. This is the consequence of a measure taken in January by the European Union to sanction the Iranian regime for the continuation of its not entirely civil nuclear program...

A single measure

An unusual measure to say the least which was not taken without pain. The times are hardly conducive to depriving ourselves of cheap energy resources. “ Europe has never taken such measures under such conditions. In December, we could have said that it was mission impossible » underlines an expert on the matter. Especially since it is accompanied by additional measures affecting the transport of oil, credit and insurance.

It was therefore necessary to give a deadline to the various European countries which have Iran as a supplier: Greece mainly, Spain and Italy also. Countries which have some cash flow problems at the moment; the end of Iranian oil, purchased on credit, could not have come at a worse time. But the Ministers of Foreign Affairs, on June 25 in Luxembourg, did not want to review this decision taken last January. To extend the exemption, unanimity would have been required (this is the “interesting” aspect of this decision: having enacted an embargo in January, with an exemption left until the end of June, without providing for automatic extension).

Hit Iran in the wallet

The EU – like the USA – are, in fact, determined to hit Iran where it hurts: in the wallet! As a European official explains, oil represents 80% of Iran's external revenues and 50% of its budget. And, around 20% of oil exported is to the European Union (*). “ The effect is not negligible. “It will not show up immediately in full, according to him. " We can expect the full effect of this measure at the end of the second half of 2012. ». Most “We already see it in the figures, of course, not official. There is a decrease (of oil exports), according to unofficial figures. »

Difficult compensation for Iran in a context of crisis

The perverse risks of this measure seem limited, according to him. " Iran will not be able to compensate. It is not always easy for these states to substitute the EU for others. » The danger was, in fact, to see the regime find other customers on the market or take advantage of an increase in oil and compensate for the drop in quantity by the increase in price. This double risk has for the moment been circumvented. “There is no increase in price.”

On the one hand, the economic crisis is making oil prices low, as demand has dried up the inflationary effect. A slight rebound has just taken place today at the end of the European summit. But we cannot venture to make predictions for the future. And several oil-producing countries, in the Gulf in particular, have promised to compensate for the reduction in Iranian crude, to avoid a surge in prices. This has made it possible today to limit the price of oil.

An embargo followed by other measures

On the other hand, several countries have already followed or are preparing to follow the European Union. The path generally found is not a total embargo – only Europe has imposed it. “ The total ban is a European exclusive.” Japan and South Korea in particular (10% each of Iranian crude imports), and India have also committed to reducing their imports. A decision that was not always made entirely spontaneously. It follows an American commitment to grant waivers to countries trading with Iran which agree to reduce their oil imports.

Finally, Europe added a twist to its European embargo by taking two complementary measures: the ban on insurance and the transport of Iranian petroleum products. Which indirectly affects Iranian exports to other countries; it thus makes purchases of Iranian oil (other than on the spot market) more risky. And, there, it is even less easy to find “insurers” or “financiers” ready to take over. “ A letter of credit must be issued by a bank with an excellent rating » by the rating agencies. More and more rare at the moment...

Other sanctions: not immediately

As for predicting other sanctions against Iran, our interlocutor is cautious “ Much that could be done has been done. Because oil is the regime's main source (of money). » “Additional measures can be taken, but it will not be easy. (…) A measure (embargo, sanction) must target the regime and, at the same time, limit the effect on the population. » « It is not simply a question of taking the main sectors of the Iranian economy and targeting the main ones, it is necessary to measure the exact effect on the regime and on the population. »

(*) The European Union is the second largest customer of Iranian oil (18%) after China (22%), ahead of Japan (14%), India (13%), South Korea (10%) and Turkey (7%)

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Nicolas Gros Verheyde

Chief editor of the B2 site. Graduated in European law from the University of Paris I Pantheon Sorbonne and listener to the 65th session of the IHEDN (Institut des Hautes Etudes de la Défense Nationale. Journalist since 1989, founded B2 - Bruxelles2 in 2008. EU/NATO correspondent in Brussels for Sud-Ouest (previously West-France and France-Soir).

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