Oil Embargo Alert: EU Moves To Ban Iran’s Crude
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Members of the European Union have come to a preliminary agreement to ban the imports of Iranian crude oil, though it has not been confirmed when the embargo will but installed. This follows the United States’ decision to impose financial sanctions on the belligerent country, leaving the future of oil prices in jeopardy.
Oil prices have been increasing since the start of the year, largely on the back of uncertainty over Iran’s future crude trade and security along the Strait of Hormuz.
Members of the European Union have come to a preliminary agreement to ban the imports of Iranian crude oil, though it has not been confirmed when the embargo will but installed. This follows the United States’ decision to impose financial sanctions on the belligerent country, leaving the future of oil prices in jeopardy.
Oil prices have been increasing since the start of the year, largely on the back of uncertainty over Iran’s future crude trade and security along the Strait of Hormuz.
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In the latest move against Iran’s nuclear ambitions, European countries have taken their boldest step so far in the increasingly tense standoff with Iran, agreeing in principle to impose an embargo on Iranian oil, said French and other European diplomats on Wednesday.
The final decision, however, would not be announced until the end of January as steps are being taken to avoid major disruptions in global oil supplies.
According to Mike Wittner, head of oil market research for the Americas with Societe Generale, the ban would require about 600,000 bpd of replacement supply from Saudi Arabia, depleting the country’s spare capacity. Iran, on the other hand, would struggle to find alternative buyers for its supply, said Wittner in an interview with Bloomberg.
The move is expected to have a major effect on Iran, given that it sells almost 20 percent of its oil to Europe. European and American officials hope the move will reduce Iranian government income, by forcing Iran to sell the oil to other customers at steep discounts.
Iran, the world’s third-largest oil export, refutes Western claims that it is building nuclear weapons, but instead says its nuclear programme is exclusively for medical and power-generation purposes.
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The United States has welcomed EU’s steps on the oil ban, with the U.S. State Department spokesperson Victoria Nuland saying:
[quote] We do believe that this is consistent with tightening the noose on Iran economically. [/quote]Related: Iran Warns West: Ban Our Oil And Prices Will Rise Above $250
U.S. Treasury Secretary Timothy Geithner who is travelling to China and Japan is expected to offer the two countries ideas on how to place increased pressure on Iran, the Treasury Department said on Wednesday.
However, China, a key ally of Iran, has often sought to take a softer stance on Iran than its fellow UN Security Council members.
China and Iran have become major economic partners in recent years, partly due to the withdrawal of Western companies in line with sanctions against Tehran.
On Wednesday, the AFP reported that “China opposes ‘unilateral’ US sanctions on Iran,” arguing that sanctions would not resolve the outstanding conflict with Iran.
“China opposes placing one’s domestic law above international law and imposing unilateral sanctions against other countries,” said foreign ministry spokesman Hong Lei, adding that China has regular “open and transparent economic and energy interactions with Iran.”
