Russia To Benefit From Western Sanctions On Iran

By: EW News Desk Team   Date: 17 February 2012

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EW News Desk Team

Always on the look out for the latest news to monitor the state of the world economy.

EconomyWatch, News Desk Team

 

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17 February 2012

In the last few months, the United States and Europe have imposed tough sanctions on Iran, especially on Iranian oil exports as a retaliation move against the belligerent state’s nuclear ambitions. But as the New York Times reports, Russia’s oil industry could stand to be the biggest winner from the sanctions.

With Iran’s latest nuclear tests off the Straits of Hormuz, Western nations have been quick to impose tough oil and financial sanctions against Iran, as part of international pressure to force it to reverse course on its nuclear ambitions.

Related News: Iran’s Currency Plunge 10% After Fresh US Sanctions

According to an exclusive report from Reuters, major European oil companies have voluntarily cut ties with Iran, a move expected to make substantial reductions in crude flows to the continent in March.

An unnamed customer told Reuters:

We have significantly reduced our purchases because of the political situation. We are still lifting - but much, much less than two months ago.

With the fresh US and EU led sanctions, oil companies have found it harder to engage Iran, from problems arising from financial blockades to transport and insurance complications.

Related News: Iran Will Block “World’s Most Important Oil Chokepoint” If Sanctions Are Imposed

Related News: Oil Embargo Alert: EU Moves To Ban Iran’s Crude

According to Qfinance, “Iran has the ability to control or shut down shipping through the Strait of Hormuz more or less at will. A few successful medium and long-range missile tests as part of an Iranian navel exercise in the area in late December gave point to this threat.”

They added:

The Strait, as Stratfor points out, is the global economy’s Achilles heel and would be a limiting factor on any US moves to counter either Iran’s nuclear ambitions or its desire to extend its influence in Iraq and across the Middle East generally.

Read the full story from Qfinance: The Future Of Oil Prices In 2012? It’s Anyone’s Guess

But according to the New York Times, Russia stands to be the sole beneficiary of the sanctions; sanctions that threaten to disrupt global oil movements and inflate oil prices.

Related News: Oil Crosses $100 On First Trading Day of 2012

Related News: Iran Warns West: Ban Our Oil And Prices Will Rise Above $250

The Times wrote:

Its (Russia’s) pipelines stand ready to serve customers willing to pay a premium price — with a grade of oil closely resembling Iran’s.

Furthermore, the Times points out that Russia’s oil exports are not subject to transport blockages threatened by Iran – Russia has a pipeline system that can supply Iran’s traditional customers in both Europe and Asia.

Russia is now the world’s largest oil producer, pumping about 10 million barrels of oil a day, slightly more than Saudi Arabia. Of this, Russia exports seven million barrels a day. Most of it goes to customers in Europe and Asia, although small amounts from Siberia make it as far as the West Coast of the United States.

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