EU hits Iran with oil ban and asset freeze over nuclear effort

Jan 25, 2012 12:00 AM

by Ewa Krukowska and Gregory Viscusi

European Union foreign ministers agreed to ban oil imports from Iran starting July 1 as part of efforts to ratchet up pressure on the Persian Gulf nation’s nuclear program, the 27-nation block said.
The EU will freeze assets in Europe of the Iranian central bank as well as of eight other entities and ban trade in gold, precious metals, diamonds and petrochemical products from Iran. The Iranian Foreign Ministry in a statement called the decision “aggressive” and said it will have “negative consequences” in Europe, including higher oil prices.

Among the entities is Bank Tejarat, the last major Iranian bank financing large-volume trade in Europe. Also sanctioned is port company Tidewater, owned by the Islamic Revolutionary Guard Corps, which operates about 90 % of Iran’s container ports, according to UK Embassy spokesman James Barbour in Washington.
“These EU sanctions will hurt Iran very deeply,” Shada Islam, Middle East and Asia analyst at the Friends of Europe policy group in Brussels, said. “To be really effective, however, the EU and the US must also try and get key Asian countries, including China, on board.”

An Iranian foreign ministry official said the pressure won’t force Iran to change its actions. Sanctions have “proved ineffective in the past and will prove futile in the future,” said Abbas Aragchi, a deputy foreign minister.
The EU said in Brussels that its actions “target the sources of the finance for the nuclear program, complementing already existing sanctions”.

Asset freeze
The asset freeze also applies to Sad Export Import Co., a front company involved in arms transfers to Syria, the EU said today in its Official Journal. Other entities subject to restrictions include Darya Delalan Sefid Khazar Shipping Co., which is owned or controlled by Islamic Republic of Iran Shipping Lines, and Behnam Sahriyari Trading Co., which sent containers of firearms to Syria in May 2007.
Japanese Foreign Minister Koichiro Gemba today called the EU ban “quite drastic” and differs from Japan’s plan to gradually cut purchases of Iranian crude.

New contracts on oil imports from Iran and extensions of existing deals will be banned, the EU said. Shipments under agreements already in place can continue until July 1.
The EU measures against Iran also include a ban on the export of equipment and technology for the Iranian petrochemical industry.

Oil prices
Crude for March delivery was little changed at $ 99.66 a barrel in electronic trading on the New York Mercantile Exchange. The contract earlier increased as much as 0.4 % to $ 99.98.
The Iranian Navy didn’t harass the USS Abraham Lincoln, an aircraft carrier, as it went through the Strait of Hormuz into the Persian Gulf on Jan. 22, Pentagon spokesman Navy Captain John Kirby told. The Lincoln replaced the USS John Stennis, which left the area on Dec. 27.

“HMS Argyll and a French vessel joined a US carrier group transiting through the Strait of Hormuz, to underline the unwavering international commitment to maintaining rights of passage under international law,” the UK Ministry of Defense said.
The acting commander of the Islamic Revolutionary Guards Corps, Brigadier-General Hossein Salami, said Jan. 21 the US Navy has deployed warships in the region “for a long time” and the current situation “is not new”.

Less confrontational
His remarks were less confrontational than those of Mohammad Kowsari, deputy head of the Parliament’s National Security and Foreign Policy commission, who was cited as saying Iran will “certainly close the Strait of Hormuz” if sanctions “interrupt” its oil exports. About 20 % of globally traded oil transits the Persian Gulf passageway.
“We can keep the Strait of Hormuz open and we will do what is necessary to achieve that,” Ivo Daalder, the US ambassador to NATO, said.

The US and EU say Iran’s nuclear-development plans are aimed at gaining atomic weapons capability. The Islamic republic, the second-largest oil producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, is already under four rounds of UN sanctions and says its nuclear program is for civilian energy and medical purposes.
The International Atomic Energy Agency said it will send inspectors to Iran Jan. 29 to Jan. 31 in an effort to resolve questions raised by its nuclear activities.

“Failed”
“The Iranian leadership has failed to restore international confidence in the exclusively peaceful nature of its nuclear program,” said UK Prime Minister David Cameron, French President Nicolas Sarkozy and German Chancellor Angela Merkel in a joint statement.
“We will not accept Iran acquiring a nuclear weapon.”

In Washington, President Barack Obama welcomed the EU move as demonstrating “once more the unity of the international community in addressing the serious threat presented by Iran’s nuclear program”.
The US “will continue to increase the pressure unless Iran acts to change course and comply with its international obligations”, he said.

While the EU decision will be binding on member states, a separate regulation is needed for it to become binding on companies.
The European Commission, the EU’s regulatory arm, is expected to offer a draft rule on that matter within days, according to an EU diplomat.

Mediterranean stance
Mediterranean countries that import much of their crude from Iran, such as Greece, Spain and Italy, had argued for sanctions to be phased in over as much as a year. Both Spain and Italy get 13 % of their crude imports from Iran, according to the US’s Energy Information Administration.
The UK and Germany, which have also sought swifter sanctions, get only 1 % of their oil imports from the Islamic republic, while France gets 4 %.

Spanish Foreign Minister Jose Manuel Garcia-Margallo told that Saudi Arabian officials told him they will make up for supply shortfalls.
In addition to the four sets of UN sanctions, Iran is under other US and EU restrictions. Oil sales earned Iran $ 73 bn in 2010 and supplied more than 50 % of the national budget and 80 % of exports, according to the US Energy Department and the International Monetary Fund.

Iran produced 3.58 mm barrels of crude a day in December. That’s about 4 % of global oil consumption.
The EU imported EUR 14.5 bn ($ 18.9 bn) of goods from Iran, 90 % of which was oil and related products, in 2010 and exported goods to the country worth EUR 11.3 bn, the EU said in a Jan. 20 statement.

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