January 16, 2012

Iran warns of consequences if Arabs back oil sanctions

By Ramin Mostafavi | Reuters – 8 hrs ago

Iran's Oil Minister Rostam Qasemi attends the opening of the 20th
World Petroleum Congress in Doha December 5, 2011. REUTERS/Mohammed

Photo By MOHAMMED DABBOUS/Reuters 11 hrs ago

TEHRAN (Reuters) - Iran warned Gulf Arab neighbors on Sunday they
would suffer consequences if they raised oil output to replace Iranian
crude facing an international ban.

In signs of Tehran's deepening isolation over its
refusal to halt nuclear activity that could yield atomic bombs,
China's premier was in Saudi Arabia probing for greater access to its
huge oil and gas reserves and Britain voiced confidence a once
hesitant European Union would soon ban oil imports from Iran.

Major importers of Iranian oil were long loath to
embargo the lifeblood of Iran's economy because of fears this would
send oil prices rocketing at a time - amidst debt and deficit crises
and high unemployment - when they could least afford it.

But strong momentum for oil sanctions has been created
by a U.N. watchdog report saying Iran appeared to have worked on
designing an atom bomb.

A new U.S. law signed by President Barack Obama on New
Year's Eve would freeze out of the U.S. financial system any
institution dealing with Iran's central bank - which processes its oil

If fully applied, the law would make it impossible for
most countries to buy Iranian oil. Washington is offering waivers to
countries to let them keep buying Iranian oil for now, but demanding
they gradually cut their imports back.

Leaders from some of the Asian countries that buy the
most Iranian oil have begun touring the Middle East to secure
alternative supply lines from Arab states. European buyers suggest
they will also lean more heavily on Arab oil producers should an EU
ban come into effect.

Feeling increasingly encircled, Iran's hardline Islamic
clerical elite has lashed back by threatening to block the main Middle
East oil shipping route. Since the New Year, Tehran also began to
enrich uranium in an underground bunker and sentenced an
Iranian-American citizen to death on espionage charges.

Tensions in the Gulf have caused occasional spikes in
oil prices in recent weeks. The sanctions are also having a real
impact on Iran's domestic economy, causing prices of imported staples
to soar and the rial currency to tumble.

Iran holds a parliamentary election in March, its first
since a presidential vote in 2009 led to eight months of street
protests. Those demonstrations were put down by force, but since then
the "Arab Spring" has shown the vulnerability of states in the region
to public anger fueled by economic hardship.


Iranian OPEC Governor Mohammad Ali Khatibi said Tehran
would regard as an unfriendly act any move by neighboring Gulf Arab
oil exporters to make up for Iranian crude.

"If (they) give the green light to replacing Iran's oil
these countries would be the main culprits for whatever happens in the
region - including the Strait of Hormuz," Khatibi told the Sharq daily
newspaper, referring to the narrow sea channel through which a third
of the world's oil tanker traffic passes.

"Our Arab neighbor countries should not cooperate with
these (U.S. and European) adventurers... These measures will not be
perceived as friendly," he said.

Saudi Oil Minister Ali al-Naimi said on Saturday the
world's No. 1 oil exporter - the only one in OPEC with significant
unused capacity - was ready and able to meet any increase in demand.
He made no direct reference to sanctions on Iran.

Iran's navy commander Habibollah Sayyari said Tehran
could exert control over the Strait of Hormuz. The United States,
whose warships patrol the region, says it will not tolerate any
attempt to disrupt shipping through the strait.

Military experts say Iran could not challenge the huge
U.S.-led fleet that guards the strait for long, but its threats raise
the risk of miscalculation that could flare into a clash.

The United States and Israel postponed military
exercises scheduled to take place in coming weeks to later in the
year. Officials in both countries denied the postponement was
connected with the increasing tension over Iran.

Oil prices were down at the end of last week as
anticipation of downgrades by Standard & Poor's of several indebted
euro zone economies countered the buoyant effect of anxiety about
Iranian threats to shipping. But the standoff over Iran pointed to
continued support for higher prices, brokers and analysts said.

Iran's foreign ministry said on Sunday it had received a
letter from Washington about the Strait of Hormuz and there was no
decision yet on whether to reply. A ministry spokesman did not divulge
the contents of the letter.

Tehran had said on Saturday it had written to Washington
with evidence the CIA was involved in the assassination of a nuclear
scientist, blown up by a bomb attached to his car last week, the
latest of several such killings.

Western countries suspect Iran is trying to develop
nuclear weapons capability. Iran says it is only interested in nuclear
technology for peaceful purposes such as generating electricity.


Iran oil sales by country: http://link.reuters.com/pyw35s



Chinese Premier Wen Jiabao was pressing Saudi Arabia to
open its oil and gas wealth to more Chinese investment, Chinese media
said on Sunday. China has been Iran's biggest oil buyer.

Although Beijing opposes further international sanctions
on Iran, it has already cut its purchases of Iranian oil by more than
half for the first two months of this year.

"China and Saudi Arabia are both in important stages of
development and there are broad prospects for enhancing cooperation,"
Wen told Saudi Arabia's Crown Prince Nayef on Saturday, according to
Xinhua news agency.

Michal Meidan, an analyst with London's Eurasia Group,
said: "Beijing is concerned with the potential response to bellicose
Iranian statements and the spike in oil prices that would ensue from
greater turmoil in Syria and Iran."

Wen was also scheduled to visit the United Arab Emirates
and Qatar, two other big OPEC exporters across the Gulf from Iran.

British Foreign Secretary William Hague said on Sunday
he was "confident" the 27-member European Union would impose
resounding sanctions on Iran's oil industry and possibly other sectors
at an EU foreign ministers meeting on January 23.

After protracted reluctance to act arising from the
dependence of some debt-ridden EU economies on Iranian oil, member
states have agreed in principle to ban it and have been working on
details of how this will be implemented.

Last year EU countries collectively bought about a fifth
of Iranian exports, roughly on par with China.

Any EU-wide prohibition of Iranian oil would probably
take effect gradually. "Grace periods" on existing contracts of one to
12 months have been proposed to allow importers to find other
suppliers before implementing an embargo.

Hague said: "Our sanctions are part of trying to get
Iran to change course and to enter negotiations and we should not be
deterred from implementing those. We will continue to intensify our
own sanctions and those of the European Union."


Some analysts say Iran's leadership, which has thrived
on defiance of the West since the 1979 Islamic Revolution, is more
likely to dig in rather than back off in response to sanctions aimed
at stopping a nuclear program many Iranians regard as a matter of
national sovereignty and modernization.

A year after the collapse of the last big power talks
with Iran, its deepening nuclear defiance has raised concern of war if
harsher sanctions do not change its course.

Israel, reputed to have the Middle East's only nuclear
arsenal, sees Iran's nuclear and missile projects as a mortal threat
which it will resort to force as a last resort to stop.

The risk of Israel triggering Middle East upheaval with
a unilateral strike has the war-weary United States worried.

U.S. Joint Chiefs of Staff Chairman General Martin
Dempsey is to make his first visit to Israel on Thursday. Israeli
media say he will try to persuade his hosts not to "surprise"
Washington on Iran.

Israel's vice prime minister voiced disappointment that
the new U.S. legislation gives Obama leeway to allow sanctions waivers
to countries to keep buying Iranian crude.

"The (U.S.) Senate passed a resolution, by a majority of
100-to-one, to impose these sanctions, and in the U.S. administration
there is hesitation for fear of oil prices rising this year, out of
election-year considerations," Moshe Yaalon told Israel Radio.

Obama has said he is determined to deny Tehran the means
to develop an atom bomb. His aides cast their sanctions strategy as a
bid to work collaboratively with foreign powers and win over states
that import Iranian oil without shocking energy markets.

(Additional reporting by Robin Pomeroy in Tehran, Daniel
Fineren in London, Dan Williams in Jerusalem, Adrian Croft in London,
Chris Buckley in Beijing; Writing by Mark Heinrich; Editing by Peter

1 comment:

Anonymous said...

We are approaching the absolute certainty of heightened tension between Israel and Iran , rising oil prices and then a war.