Just as I was wondering what is missing to make Greek austerity worse, the answer came from the European Union. The 27 member states decided to impose an embargo on Iran’s oil in order to put pressure on Tehran’s nuclear programme. The embargo includes the ban on import, purchase and transport of Iranian crude oil. As the embargo is full with risks like energy prices hikes, the debt-ribben countries of South Europe countries currently struggling to overcome their debt crisis are expected to be hit by the oil embargo. Alone, Greece imports about a quarter of its oil needs from Iran.
EU governments decided to give countries with existing contracts with Iran until July 1, 2012 to end those deals.
Economic considerations weighed heavily on EU preparations for the embargo in recent weeks, because of the heavy dependence of some EU states on Iranian crude. As a result, concessions pushed for by states such Greece will likely blunt the impact of EU sanctions for now, experts said.
Greece, which is at the heart of the debt crisis and relies on international aid to stay afloat, sources about a quarter of its oil imports from Iran because of favourable financing terms, and must now seek alternative sources.
It had pushed strongly for a grace period on existing deals and had originally argued it needed a year to prepare.
To reassure the Greek government, its EU peers agreed to return to the issue of oil sanctions before May to assess whether the measures are effective and whether EU states are succeeding in finding sufficient alternative resources.
The review could potentially affect the date when the full ban takes effect, diplomats said.
“The financial situation of Greece at the moment is not the brightest one, and rightly they are asking us to help them find a solution,” a senior EU official told reporters on Friday.
Saudi Arabia, Kuwait and other oil-rich Gulf states are expected to raise their output of crude oil to offset the loss of access to Iranian exports and prevent market instability.
With a significant part of EU purchases of Iranian oil covered by long-term contracts, the grace period will be an important factor in the effectiveness of the EU measures.
Emanuele Ottolenghi of the Foundation for the Defense of Democracies in Washington said the oil embargo was possibly the last card Western governments could play to avoid military confrontation with Iran.
But, he said, Europe’s gradual approach and the possibility of waivers in U.S. measures weakened their impact.
“Regrettably, Europe’s delay and America’s loopholes mean Iran gets a reprieve at a time when, with Iran’s nuclear programme accelerating, it would have been preferable to see an embargo implemented sooner,” he said.
European ministers also agreed to outlaw the export of key equipment and technology for the oil sector to Iran, and new investment in Iranian petrochemical firms. (REUTERS)
PS Let’s revive our relations with Iraq then or start digging in the Aegean Sea ASAP!
The proposed EU ban is madness. Oil is currently trading at@$110 a barrel. When the ban comes into effect it will go up by at least ten percent. If there is a confrontation in the Straits of Hormuz the price will rocket. There is absolutely no guarantee that the other Gulf States can make up the amount of oil which will be embargoed in Europe.
The price of oil is the determining factor in economic growth.High oil prices translate into low GDP. If the EU is to grow it needs cheap energy. Those days are past- oil is no longer cheap and never will be again. So, to make a difficult situation worse by imposing a ban is- madness. Anyway does it really matter if Iran gets the Bomb. Who are they going to use it on without being barbequed by the USA?
Robert, actually I think the USA was thinking of making a parking lot out of Iran, not really a BBQ.