Will the economies of Greece and Italy finally collapse without Iranian oil?
Having declared that the US-EU friendship will depend on whether Brussels supports Washington in its bid for imposing sanctions against Iran, the US president left Europe with no choice. The European Union, desperate to at least slow down the pace of the Eurozone’s economic meltdown, will have yet another problem to grapple with: finding alternative sources of oil supplies.
Despite the fact that the French Foreign Minister Alain Juppé personally urged his neighbors to support Washington’s initiative and increase pressure on Iran, such loyalty to its American ally aroused little enthusiasm among the EU members. And behind this are economic factors.
The main European consumers of Iran’s oil (Europe accounts for approximately 18% of Iran’s oil export) are Greece, Italy and Spain. That is, the most problematic of Europe’s economies. Their governments cannot afford to disrupt the traditional oil supply chain and risk further compromising national industry and infrastructure.
The French initiative attracted a host of comments. The governments of Greece, Italy and Spain flatly refused to impose an embargo on Iranian oil supplies “by the end of January”, as Paris had insisted, and demanded a certain “grace period”, which, depending on how optimistic the estimation is, might range from a month to a year.
Greece, which imports half its energy supplies from Iran, insists on the aforementioned period being one year. “We have discussed the issues and difficulties which arise from the situation in Iran and, we believe, all these questions have to be thoroughly and cooperatively examined”, said the Greek Foreign Minister Stavros Dimos. Italy, whose economy is doing no better, gets around 40% of its oil from Iran. Among other major consumers are Belgium, Great Britain and Germany.
The industrial lobby within France itself admits that “by the end of January” is, at best, optimistic. They demand that the embargo be delayed by three months. Thus the issue of sanctions against Iran yet again shed the light on the extent of developmental disproportion within the EU. Some can afford to abandon regular oil supplies at little expense to its industrial output, others – cannot do so.
Turkey’s final response to the US offer is also unknown. Turkey, albeit a US ally, is tied to Iran’s oil even more than Greece. About 30% of Turkey’s oil demand is supplied by Iran.
According to Reuters, Turkey is planning to discuss with the US such an embargo plan that would not involve the leading Turkish oil refining company – Tupras. The potential deal includes retaining enough oil supply, as well as protection from Washington’s sanctions. American legislators promised to punish state companies of those countries that engage in trade with the pariah state of Iran by forbidding them to deal with American banks.
The Turkish side points towards a provision in the law, signed by Barack Obama, whereby a country that has significantly scaled down its cooperation with Iran will not see its state companies under sanctions. Furthermore, according to the law, sanctions can be suspended if imposing them would run counter to US interest or destabilize the global oil market.
For the time being Tupras will continue to acquire oil from Iran until “the situation changes”, according to Taner Yildiz, Minister of Energy and Natural Resources of the Republic of Turkey. The Turkish Foreign Minister Ahmed Davutoglu visited Tehran to meet his counterpart Ali Akbar Salehi, the current Minister of Foreign Affairs of Iran. Turkish diplomats aim to devise a special strategy of relations with Iran. Which is, actually, quite predictable – the US is far away, while imposing sanctions against a neighboring state requires much prudence. The Turkish side assured Iran that under no circumstances will Turkish territory be used as a launchpad for strikes against Iran.
Another US ally, Japan, also expressed hope for more graduated sanctions, even though Tokyo’s dependence on Tehran is lower than Ankara’s. Japan gets around 10% of its oil from Iran. Yukio Edano, the Japanese Minister of Economy, Trade and Industry, said that the Japanese government will use all available means to minimize the negative impact of anti-Iran sanctions on Japan’s economy. Like Turkey, Japan also hopes to strike a deal with the US regarding its state companies and devise measures to avert a drastic surge of oil prices.
There’s also China, which accounts for 20% of Iran’s total export. China is the main consumer of Iran’s oil and is not inclined to support the US policy at its own expense. “China stands against any kind of unilateral sanctions imposed by one state upon another”, said Hong Lei, a spokesman for the Chinese Foreign Ministry. “We, just like many other states, maintain normal trade and economic ties with Iran, which do not violate the UN resolution”. Other officials of various levels also described Beijing’s view: Iran has been and remains an important trade partner for China, and one of the main energy suppliers to China, and as such China is not going to revise its stable relationship.
Right after the Chinese statement it became known that the US Secretary of the Treasury Timothy Franz Geithner himself wants to visit China. Presumably, he will try to convince China to support the US in its economic confrontation with Iran. The visit will be at the highest level – the minister will conduct negotiations with Wen Jiabao, the Chinese PM, and the country’s Vice-President Xi Jinping.
The outcome of the talks (for the US) is difficult to predict. Beijing has already lost a number of lucrative deals and significant investment in Libya, ruined thanks to Washington. And the consistent US policy of hindering Chinese interest wherever possible will not be forgotten.
India buys around 12-15% of its oil from Iran. As is the case with China, India’s trade partnership with Iran is not restricted to oil, so walking away from the established status-quo seems highly unlikely. Just in case, way back in mid-December India’s representatives announced that they’re considering making payments for Iranian oil through Russian banks. Supplies to India equal those to China, and also constitute 20% of Iran’s export.
Iran’s President Mahmoud Ahmadinejad embarked on a large-scale tour of Latin America and the Caribbean. This includes visiting all countries which are not on friendly, or are even on hostile, terms with the USA – Venezuela, Nicaragua and Cuba. Venezuelan President Hugo Chavez had already hinted that Iran’s president is a welcome guest, while Iran’s nuclear program raises no doubts about its exclusively peaceful nature.
Iran remains just as determined militarily. After the notorious “Velayat 90” exercises and threats towards an outgoing American carrier, Israel and the US decided to respond accordingly and conduct as soon as possible AA and ABM exercises, which are planned for spring. The exercises, traditionally poetically dubbed “Austere Challenge”, will become “the most large-scale in the history of military cooperation between the two states”, according to Israeli and American media. It’s worth noting that Iran’s threats towards the American carrier John C. Stennis can be regarded as a success – the American carrier group will not come back to the Persian Gulf. And, perhaps inspired by this success, Iranian military officials decided to move forward.
As a response to the US-Israeli exercises, the naval commander for the Islamic Revolutionary Guards Corps (IRGC), Rear Admiral Ali Fadavi announced new maneuvers in the Gulf and the strait of Hormuz in February. They will be conducted within the framework of the traditional “Great Prophet” maneuvers and will be based upon a potential naval confrontation with the USA.
Thus, it will be rather difficult to forge a solid economic blockade of Iran. The geopolitical opponents of the US and Israel see little point in helping them pursue their own interest, while many American allies are scared of sanctions even more than Tehran itself.
Source: World Intellectual Network