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Iran Oil Embargo: Europe Sanctions ItselfBy: Moammar AtwiPublished Thursday, February 9, 2012The United Statesí policies concerning the Iranian nuclear program could make this winter even tougher for Europe, whose economies would be further threatened by a shortage of crude oil imports.About six months before the European Unionís embargo on Iranian oil comes into effect (in early July), politicians and analysts have begun considering the harm that could befall the global economy as certain countries pay the price for the USí hard-line stance against Tehranís nuclear program.Saudi Oil Minister Ali al-Nuaimi has said that his country (the worldís largest oil producer) is willing to meet any increase in demand for crude oil by consuming countries that results from a cutoff of Iranian supplies. That would mean raising Saudi Arabiaís output from 10 to 12.5 million barrels per day.Nevertheless, European countries are still unsure they will find suitable alternatives to Iranís high-quality crude, and also question Riyadhís capacity to sustain its proposed hike in production.Should Tehran make good on its threat to stop supplying oil immediately as a pre-emptive measure (in accordance with a bill in the Iranian parliament), then Europe will suffer a shortage of crude oil. With the continent experiencing an exceptionally cold winter, EU governments could come under pressure to breach or bypass the embargo.The embargo, which was accompanied by a decision to stop dealing with Iranís central bank will also lead to a sharp rise in world oil prices, further damaging battered Western economies, according to US analyst Stephen Lindman.Most Asian countries, notably China, Japan, South Korea and India, continue to oppose or have reservations about an embargo on Iranian oil. The state news agency IRNA recently quoted Iranian legislator Gholamreza Haddad Adel as saying that only 18 percent of Iranís exported oil goes to Europe. The bulk goes to non-European countries that will be unaffected by an EU embargo.The EU financial sanctions are more of a problem, as they stand to complicate transactions with Asian importersí reimbursement process. They may have to resort to intermediaries in the Middle East, as India did by using a Turkish bank as intermediary to pay for its imports of Iranian oil.The Iranian MP also pointed out that Iranís customers include heavily indebted eurozone members Spain, Greece, and Italy. He suggested that the oil they currently buy could be exported to Russia instead.The International Energy Agency (IEA) estimates that Tehran sold 20 percent of its crude oil (around 600,000 barrels per day) to the EU and 65 percent to Asia, principally to China, in the period January Ė September 2011 January 2012. Italy was the top European importer with 185,000 barrels per day, accounting for 13 percent of its total oil consumption. Spain came second with 161,000 barrels per day, accounting for 12 percent of consumption. They were followed by Greece with 103,000 barrels per daily, equaling 30 percent of consumption. France imported 58,000 barrels per day, covering just 3 percent of its needs. The remainder went to a variety of European countries each purchasing small quantities of oil.The top three European importers: crisis-ridden Italy, Spain, and Greece, accounted between them for three quarters of Iranís total EU oil exports.Non-EU Turkey, a major customer which buys about 8 percent of Iranís oil output, officially declared that it would not abide by the embargo. Turkey bought 196,000 barrels of Iranian oil daily in the period in question, 30 percent of its overall consumption.It is clear, therefore, that there are other customers for Iranian oil who could purchase supplies made available by an EU embargo. The Europeans, meanwhile, could suffer energy shortages and find that the embargo hurts their own countries most, as former Dutch Foreign Minister Ben Bot was recently quoted as saying.Iranís most important client is China, which imported 550,000 barrels per day last year or 22 percent of Iranís total output. That is almost as much Iranian oil as the entire EU combined, and China appears committed to continuing to buy Iranian oil. Chinese Premier Wen Jiabao has confirmed that China remains committed to buying Iranian oil, despite his recent Gulf tour Ė comprising Saudi Arabia, the United Arab Emirates (UAE), and Qatar Ė during which he discussed possible oil purchases from these countries.However, Beijing has reportedly reduced its imports of Iranian crude oil over the past three months by about 285,000 barrels per day Ė i.e. more than half the 2011 average Ė because of an ongoing disagreement with Tehran over prices and terms of payment.Japanese imports stood at 327,000 barrels of Iranian oil per day, 13 percent of Iranís exports and 7 percent of Japanís total demand. Japan last month expressed strong reservations about sanctions on Iranian oil. Foreign Minister Yoshihiko Noda reportedly told US Treasury Secretary Timothy Geithner at a meeting in Tokyo that he was deeply skeptical of such measures.India, which last year imported 310,000 barrels per day from Iran (12 percent of Iranís exports and 9 percent of its consumption), has opposed the idea of sanctions and confirmed that it will continue to buy Iranian oil.South Korea, whose imports from Iran stood at 228,000 barrels per day, has followed in Japanís footsteps, expressing its reservations and asking the US for a grace period to seek alternatives supplies.The fact that the West stands to suffer from an embargo on Iranian oil does not mean that Iran will be in a comfortable position. The country has been subject to various embargoes and sanctions since its Islamic revolution in 1979 and suffers major economic difficulties. Oil accounts for 90 percent of the countryís total exports and half of the governmentís revenue.It is also Iranís main source of hard currency Ė hence the chaos that struck Iranís financial markets after news of the European sanctions was announced, prompting a dash for hard currency.According to official statistics, Iran produces about 3.5 million barrels daily and is the second largest producer in the Organization of Petroleum Exporting Countries (OPEC). Its reserves are estimated at 137 billion barrels, 9 percent of the global total.In any case, the European sanctions are bound to have an impact because of rise that will result in oil prices and the inability of the Gulf states to make up for the shortfall.But much may happen between now and July, with even the US looking for ways out for some Asian countries that cannot do without the black gold that flows from Iran.This article is an edited translation from the Arabic Edition.http://english.al-akhbar.com/content/iran-oil-embargo-europe-sanctions-itself