European Union diplomats agreed to place an embargo on the import of Iranian oil with a phase-in period to July 1, an EU official said.
Foreign ministers of the 27-nation EU are expected to formally approve the embargo plan later today at a meeting in Brussels, the official said on condition of anonymity because the talks are private.
Iran has threatened to close the Strait of Hormuz, the Persian Gulf passageway for about 20 percent of globally traded oil, if the EU and the U.S. impose stricter sanctions. Saudi Arabia, Iran, Iraq, the United Arab Emirates, Qatar and Kuwait ship crude and liquefied natural gas through the strait.
“We can keep the Strait of Hormuz open and we will do what is necessary to achieve that,” Ivo Daalder, the U.S. ambassador to NATO, said in a BBC Radio 4 interview today.
Oil rose in London as the EU ministers met. Brent oil for March settlement advanced as much as 59 cents, or 0.5 percent, to $110.45 a barrel on the London-based ICE Futures Europe exchange. It was at $110.15 a barrel at 9:15 a.m. London time.
EU ministers must balance their wish to act fast to pressure Iran to stop its nuclear program against the need to give some member states time to find alternative oil sources. EU foreign policy chief Catherine Ashton said sanctions might also target Iran’s central bank. German Foreign Minister Guido Westerwelle said the steps are aimed at “drying up funding” for Iran’s nuclear research.
‘Impress Iran’ “
Europe is now preparing to sanction those parts of the Iranian economy where it will hurt: oil and finance,” Jan Techau, director of the Brussels-based European Center of the Carnegie Endowment for International Peace, said in an interview. “Europeans are united on this and it is this unity that seems to impress Iran.”
The U.S. and Europe have raised pressure on Iran this month after the International Atomic Energy Agency, the United Nations atomic watchdog, said Iran had started enriching uranium up to 20 percent at a fortified site. President Barack Obama signed a bill on Dec. 31 that tightens sanctions on Iran by denying access to the U.S. financial system to any foreign bank that conducts business with the Central Bank of Iran.
Swedish Foreign Minister Carl Bildt said that sanctions alone are “not the answer.” Bildt, speaking to reporters before the meeting in Brussels today, said the EU needs to seek “diplomatic engagement” with the Iranian leadership. EU diplomats said the bloc would review the sanctions before May 1.
Iran Oil Earnings
Oil sales earned Iran $73 billion in 2010 and supplied more than 50 percent of the national budget and 80 percent of exports, according to the U.S. Energy Department and the International Monetary Fund. Iran produced 3.58 million barrels of crude a day in December, according to data compiled by Bloomberg. That’s about 4 percent of global oil consumption.
OPEC producers have an “effective” spare crude-production capacity of 2.85 million barrels a day, the International Energy Agency said in a Jan. 18 report. Saudi Arabia’s spare capacity of 2.15 million barrels a day accounts for about 75 percent of the OPEC total, according to IEA estimates.
The IEA’s effective spare-capacity tally for OPEC excludes Iraq, Nigeria, Venezuela and Libya. With those nations included, the figure rises to 3.8 million barrels a day.
The EU imported 14.5 billion euros ($18.7 billion) of goods from Iran, 90 percent of which was oil and related products, in 2010 and exported goods to the country worth 11.3 billion euros, the EU said in a Jan. 20 statement.
