Iran Plays The Oil Card

Speaking of Iran (see the previous post), they may be turning the tables on the whole US-proposed, European-backed sanctions regime.  The United States is championing an idea to strangle the Iranian economy by banning the sale of Iranian oil globally, with the hope being that the loss of their main revenue stream will convince the Iranians to give up their nuclear research program and perhaps as a bonus bring down the Iranian government.  For the United States, the sanctions are no big deal since the US basically imports no oil from Iran, for the Europeans though it is a different matter – Europe accounts for roughly a quarter of Iran's oil export sales.  Because Europe gets so much oil from Iran, the European version of the sanctions have a six-month phase-in period to allow European countries to find  alternative supplies of oil.

But the Iranians are going them one better by discussing their own boycott of oil sales to Europe, meaning that shipments to Europe could stop immediately.  To make matters worse for the European Union, some of the countries that are the most dependent on Iranian oil are also the European economies in the worst shape, namely Greece and Italy.  The six-month phase-in was designed to put as little stress as possible on their economies, but if Iran halts shipments immediately, both countries will need to replace the volumes of missing Iranian crude on the more volatile, and more expensive, spot crude oil market, or face the prospect of massive fuel shortages; two conditions that could push their already teetering economies over the edge.

So far Iran has held off on making their embargo official, the Iranian parliament was suppose to debate the embargo bill last Sunday, but postponed action.  Other Iranian officials though are saying that the European sanctions are not a question of if, but rather when.  And in another blow to the US-led efforts, both China and India have publicly stated that they will be happy to buy up any excess Iranian crude leftover from the embargoed European sanctions.  Both countries will likely force Iran to sell them crude oil at a discount, but vast sums of money will continue to flow into Iran, severely undermining the whole point of the US-led sanction regime.