Ironically, and as has been stated here many times before, by enacting the proposed sanctions and embargo, the US, but mostly Europe is doing nothing but shooting itself in the foot, as it opens up a brand new pathway of not only outright defiance, and thus political brownie points domestically, of the US, but it will allow it to buy even more crude, at cheaper prices, while in the process it is forced to build closer monetary relations with its neighboring countries, relations that rely less and less on the world’s increasingly less relevant reserve currency.
– EU Agrees Iranian Oil Embargo (Guardian, Jan. 23, 2012):
Foreign ministers’ deal in Brussels could lead to soaring fuel prices and Iran closing the strait of Hormuz
The long-running standoff between Iran and the west over Tehran’s nuclear programme has shifted into a more unpredictable phase after Europe decided to impose an oil embargo on the Islamic republic.
The decision by EU foreign ministers at a meeting in Brussels raised the stakes dramatically in the war of wits between Iran and the west.
The EU decided no further oil contracts could be struck between the member states and Iran while existing oil delivery deals would be allowed to run until July.
Several countries shared reservations about the move, EU diplomats said. Greece was the trickiest problem since it imports a lot of Iranian oil on very favourable conditions. Given the financial collapse in Greece, it was in a difficult position and sought compensating measures from the rest of the EU. The impact of the embargo on countries such as Greece is to be reviewed in May.
Iran is Opec’s second biggest oil producer after Saudi Arabia, and about 20% of its oil exports go to Europe. It has threatened to close the strait of Hormuz waterway if the oil embargo goes ahead, a move that would choke off global oil supplies and send international tensions soaring.
The oil embargo represents a leap in the sanctions regime against Iran, following four earlier rounds of escalating penalties.
Senior EU officials also concede that the move could be risky and send oil prices rocketing at a time of extreme economic difficulty in the west.
“We need to ensure this does not destabilise the entire global oil market,” said a senior EU official.
Another EU diplomat said: “We need to see that EU countries have reliable energy supplies. But we don’t want to allow Iran time to find alternative customers.”
The Americans and the Europeans are leaning on countries such as South Korea and Japan to curb their imports of Iranian oil. The impact of the embargo may hinge on how China, a large importer, responds.
Brussels stressed that the new punitive measures were aimed at forcing Iran back to the negotiating table over its suspected nuclear projects. Talks between Tehran and the EU collapsed last year in Turkey.
EU officials say the Iranians have been sending signals about resuming talks in recent weeks, but that no one takes them seriously.
“Iran has the opportunity to come forward not just to talk, but to have some concrete issues to talk about. It is very important that it is not just about words. A meeting is not an excuse, a meeting is an opportunity and I hope that they will seize it,” said Catherine Ashton, the EU’s foreign policy chief.
While all 27 EU states signed up for the sanctions, the new regime was agreed by EU ambassadors only on Monday morning, before the foreign ministers’ meeting, indicating the difficulties in striking a deal. Two meetings of the ambassadors last week failed to break a deadlock.
In addition to the oil embargo, the EU also decided to freeze the assets of the Iranian central bank, arguing that the aim was to choke off funding for the nuclear programme.
“The Iranian programmes are proceeding apace and represent a strategic threat,” said the diplomat. “The aim is to have a big impact on the Iranian financial system, targeting the economic lifeline of the regime.”
Unwilling to back down from the growing criticism that his foreign policy would be “dangerous,” Ron Paul told voters in Iowa that western sanctions against Iran are “acts of war” that are likely to lead to an actual war.
Paul said that Iran would be justified in responding to sanctions by blocking the Straits of Hormuz, adding that the country blocking the strategically important strait is “so logical” since they have no other recourse.
He then compared the situation to China blocking off the Gulf of Mexico to trade.
Effectively, the measures will force companies and financial institutions throughout the world to choose between the United States and Iran as their business partner.