|
EU is rethinking its decision to ban Iranian oil imports as it could damages its own economy without causing the much-intended harm to Iran's revenues. EU is rethinking its decision to ban Iranian oil imports as it could damages its own economy without causing the much-intended harm to Iran's revenues. The European Union doubts its decision of banning Iranian oil imports according to traders and diplomats, since the embargo could have a disastrous effect on its economy leaving Iran scot-free without much harm to its revenues.
The decision to ban Iranian oil imports was laid on the fact that oil accounts for nearly half of the Tehran's budget revenues and would cost its economy a loss of billions of dollars. As sanction approvers believe, this will distract Tehran from its hi-profile nuclear programme to create a nuclear bomb in a couple of years. However, EU's plan could backfire, as a small rise in oil prices due to the embargo, would help Tehran recover its losses that it would encounter while selling oil at discounted prices to Asian countries. EU's tremble is likely because some of the weakest economies are part of the continent, which would be hard hit if Iran stops its imports. Leave aside the remaining; some of the countries like Italy, Spain and Greece are dependent on Iran for a major chunk of their needs. A sharp shoot in the prices on oil would be felt by all European oil refiners including the biggest importers. Greece resents the fact that it could be shoved aside to make way for the embargo. On the other hand, Iran has come forward in its own defense saying, it could impose a self oil embargo to punish the West, warning that oil prices could shoot to $250 a barrel because of its decision. Sanction supporters say that the EU ban would not disrupt the Iranian oil supply, which will be diverted to China, relocating the Chinese oil towards Europe. The result - Iran will have to bargain hard with China on the oil price. The embargo has left Saudi Arabia with tough decision to make if it has to ship more oil to Europe to make up for the Iranian oil losses. That would also mean giving up some of its biggest Asian customers to Iran. Iran's main foe needs to know to what extent they can fill the gap and minimize the impact if Iran oil supplies were lost. Indian, South Korean and Japanese refineries are reluctant to buy more oil from Iran fearing payment disputes could pop up again. The Iranian oil ban decision is unlikely to be taken before January 2012 and the effective ban would take place only during the second quarter of 2012 when oil demand cedes.
Kyles Humphrey is an experienced columnist in oil related fields, who frequently writes articles related to oil prices & indexes and crude oil including tips on investment in oil. Please visit oil.com for more details.
Related Articles -
oil industry, oil investment,
| 
