European Union foreign ministers Monday approved an oil embargo on Iran, moving past an internal debate over the economic burden on some members and sending a strong rebuke to the Islamic Republic over its nuclear program.
European Union foreign ministers Monday approved an oil embargo on
Iran
,
moving past an internal debate over the economic burden on some members and
sending a strong rebuke to the Islamic Republic over its nuclear program.
Citing "serious and deepening concerns," the EU agreed to impose a
full embargo on Iranian oil, including existing contracts, by July 1. Other new
sanctions targeted the Central Bank of
Iran
and
Iranian petrochemical exports to the EU, according to a statement by the
Council of the European Union.
The embargo comes as the
U.S.
and
the EU exert unprecedented efforts to starve
Iran
from
key oil revenues, amid growing fears the alleged
Iran
nuclear buildout could inflame
Middle East
relations.
While policy analysts have expressed skepticism at the utility of an oil
embargo as a lever on
Iran
, few
doubt the EU's move will cause major ripples in the oil market. Refiners in
Spain
and
Italy
have
already begun to phase out some Iranian oil purchases in anticipation of the
embargo and those efforts promise to increase as the July deadline approaches.
Although the embargo was largely in line with expectations, oil prices rose
slightly at news the EU had agreed the policy. At 1428 GMT, the front-month
March contract on the New York Mercantile Exchange was trading up 62 cents, or
0.6%, at $98.95 a barrel. The front-month March Brent contract on
London
's ICE
futures exchange was up 64 cents, or 0.6%, at $110.50 a barrel.
The Iranian rial tumbled to new record lows against the dollar Monday on the EU
headlines, to around IRR20,500, Agence France-Presse reported.
There was no immediate reaction Monday from
Iran
, but
an official acknowledged the policy will hinder the country's largest revenue
stream.
"It will make things tougher at this end" by restricting the choice
of crude buyers, an Iranian oil official said.
In an interview with the Fars news agency Monday, Fatemeh Alia, a member of the
National Security and Foreign Policy Commission, said Iran "hasn't changed
[its] stance" regarding the possibility of closing the Strait of Hormuz, a
vital shipping lane through which passes one-third of the world's seaborne oil.
According to the International Energy Agency, the EU imports about 600,000
barrels of oil a day from
Iran
--close
to a quarter of
Tehran
's
exports of 2.6 million barrels a day. But those imports fall unevenly, with
many of
Europe
's most stressed economies--
Greece
,
Italy
and
Spain
--among
the biggest customers.
In recent weeks,
Greece
emerged as the most skeptical EU member of the embargo, arguing that a slower
implementation was needed to ensure that its economy wouldn't be excessively
burdened.
Under Monday's agreement the EU said it will undertake a review of the policy's
effects on member states by May 1, bowing to a condition sought by
Greece
. However,
any move to reverse or delay the embargo would require a unanimous decision of
the EU's 27 members, officials said, and
Greece
didn't win a special exemption giving it extra time beyond July 1 to implement
the full embargo, a proposal it had made last week.
Diplomats said EU foreign ministers would promise to take all necessary
measures to ensure all member states would continue to have access to oil
supplies.
The sanctions represent the most-serious ratcheting up of EU pressure against
Iran
thus
far over its nuclear program.
France
,
which initially proposed the sanctions, is one of several member states that
accuse
Iran
of
seeking to develop nuclear weapons, a charge that
Tehran
denies.
The EU is yet to get a response to an October letter from its foreign policy
chief Catherine Ashton to
Iran
's
chief nuclear negotiator Saeed Jalili, offering to resume talks.
Monday, the EU pledged to continue with its "dual track"
approach--sanctioning
Iran
on
the one hand, while remaining open to negotiations on the other. The EU move
comes as top
U.S.
officials also apply pressure to
China
,
India
and
other Asian countries to trim Iranian imports. Despite those diplomatic
efforts,
China
and
other countries continue to say they will import from
Iran
.
Joseph Nye, a
Harvard
University
political scientist, said in a recent interview that the effectiveness of an
oil embargo would be limited as long as
Iran
is
still able to sell some oil on the international market. An additional risk is
that an embargo could be trumped if
Iran
follows through on threats to close to the
Strait of Hormuz
, Nye
said; that could cause oil prices to rise steeply and generate higher oil
revenues for
Iran
.
An embargo will have "some effect, but whether it will have the effect
policy makers want is an open question," said Nye.
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