July 1, 2012
July 1, 2012
A European Union embargo on Iranian oil went into effect on Sunday, provoking anger in Tehran which says the measure will hurt talks with world powers over its sensitive nuclear activities.
Oil Minister Rostam Qasemi sought to downplay the embargo as just the latest punishment in decades of ineffective sanctions.
Iranian leaders have insisted they will forge ahead with their atomic program, regardless of the Western restrictions and others imposed by the U.N. Security Council.
Oil market observer bodies and analysts say the embargo, coupled with U.S. financial sanctions ramped up on Thursday, are gutting Iran’s vital oil exports, which account for half of government revenues.
The International Energy Agency (IEA) says Iran crude exports in May appear to have slipped to 1.5 million barrels per day (mbpd) as the market braced for the embargo, which has been phased in since being announced January 23.That is far less than the 2.1-2.2 mbpd Iran insists it continues to sell abroad.
“The sanctions have had no effect on Iran and will have none,” Qasemi was quoted as saying on Sunday by the ISNA news agency.
“I do not see a problem in our enemies starting the sanctions as of today (Sunday), since these sanctions have existed for many years and nothing has happened and one should not anticipate anything new,” he was also quoted as saying on the website of state broadcaster IRIB.
Qasemi and other officials admitted the “illogical” embargo had reduced exports to EU nations, but they said other nations had stepped forward to buy the oil.
“While we collectively exported 18 percent of our oil to them before, it is not difficult to substitute customers for this much oil in the world,” Qasemi said.
It was not possible to verify that claim because Iran has turned off the mandatory location transponders on most of its fleet of 39 oil tankers.
The IEA and experts say most of the tankers remain anchored off Iran and are being used to store up to 42 million barrels of oil unable to be exported.
Before the embargo, Europe bought some 600,000 bpd from Iran, which sent two-thirds of its exports to China, India, Japan and South Korea.
The United States has granted exemptions to those Asian countries from its new sanction imposed on Thursday that targets foreign companies doing business with Iran.
That move averted a potential diplomatic row with China, Iran’s biggest oil customer, which greatly increased Iran crude purchases last month after a sharp dip earlier this year because of a commercial dispute with Iran. Beijing refuses to go along with the Western sanctions.
“Plans in progress”
Non-EU nations wanting to buy Iranian oil face an obstacle in insuring the tanker shipments, as more than 90 percent of such insurance is by EU companies now barred from underwriting Iran oil delivery contracts. China gets around that by having its companies insure the tankers.
Iranian officials said the country has stored up imported goods and hard currency for a “battle” against the EU sanctions. They acknowledged though that the measures may cause economic disruptions.
Vice President Mohammad Reza Rahimi said the country has stockpiled necessities to reduce the impact of the embargo hitting the oil and banking sectors.
“Today, we are facing the heaviest of sanctions and we ask people to help officials in this battle,” Rahimi was quoted by state television’s website as saying at a religious conference. He said the “dastardly sanctions” might cause “occasional confusion” in the market, but that the Iranian nation would not be stopped.
Central bank governor Mahmoud Bahmani also told the semiofficial Mehr news agency that Iran has “plans” to deal with the embargo and enough hard currency to meet its import needs.
“We have not remained passive. To confront the sanctions, we have plans in progress,” said Bahmani. He did not elaborate on the plans.
Iran’s Oil Minister Rostam Ghasemi meanwhile ordered his staff to “mobilize” against “illegal sanctions,” Mehr said. It did not say what the measures were.
Late Saturday Ghasemi told state television that Iran has weathered previous rounds of sanctions. “I do not see it as a problem that enemies have imposed an embargo today,” he said. “They have imposed similar sanctions years ago, and nothing happened.”
He said Iran has already stopped selling oil to many EU countries and sold to others instead. “Developing countries and countries with fast economic growth have no alternative to oil. Fortunately, because of the quality of our country’s oil, all are interest in using it.”
Mehr published its own analysis listing measures that Iran could take to counter the sanctions, including shutting the vital Strait of Hormuz off its southern coast that handles a fifth of the world’s oil supply – a threat that has repeatedly been made by Iranian officials in the past. The semiofficial news agency’s editorials sometimes reflect views held by top Iranian officials who do not wish to state them publicly.
On Sunday, however, Iran’s Defense Minister Gen. Ahmad Vahidi made statements to the official IRNA news agency about the Strait in which he did not mention any plans to close it – remarks that suggest that Iran is playing down the threat in dealings with the West.
Vahidi said Iran is the main protector of the waterway, and that Tehran “has confronted anybody who tried to endanger the Strait.”
Mehr also suggested that Iran could make use of hard currencies other than the U.S. dollar and the euro, form its own insurance syndicate to replace foreign companies that withdraw from the market, store up oil in tanks for later sale so as not to cut production, or simply reduce oil production to save its reserves for the future.
The EU embargo is the latest — and most punishing — of a raft of international sanctions designed to pressure Iran to curb its nuclear program.
Most of the West fears that the Islamic republic is seeking to get to the cusp of being able to make nuclear weapons, despite Tehran’s repeated denials.
Iran denies the charges, saying its nuclear program is aimed at peaceful purposes like power generation and cancer treatment.
The sanctions are part of a “carrot and stick” approach running in parallel with revived talks between Iran and the “P5+1 group” comprising U.N. Security Council permanent members the United States, Britain, France, Russia and China, plus non-permanent member Germany.
After three inconclusive rounds that succeeded only in defining the wide gap that exists between both sides, the talks have been downgraded to the level of experts, with the next meeting scheduled for Tuesday in Istanbul.