Bloomberg News

Italy’s Monti Questions Scope, Timing of EU Ban on Iranian Oil

January 06, 2012

Jan. 5 (Bloomberg) -- The leader of financially struggling Italy questioned the scope and timing of a possible European Union halt to Iranian oil purchases, raising an obstacle to stiffer sanctions on Iran’s nuclear activities.

Penalties set to be announced on Jan. 30 should be phased in and exempt crude sold by Iran to pay off debts to Eni SpA, Italy’s largest oil company, Prime Minister Mario Monti said.

“An oil embargo is conceivable as long as it remains gradual and excludes the deliveries that serve to reimburse the billion euros in debts that Iran owes to Eni, our national company,” Monti told France’s Le Figaro in an interview published today.

Europe’s sanctions threat and an Iranian demand that U.S. warships stay out of the Persian Gulf have stirred new tensions between Iran and the West, contributing to higher energy prices.

Brent oil for February settlement rose as high as $114.64 a barrel, the highest intraday level since Nov. 14, on the London- based ICE Futures Europe exchange today. It traded at $113.93 as of 12:50 p.m.

EU sanctions decisions require that all 27 member states go along. An oil-supply dislocation might further damage the economies of Italy and Greece, two countries at the forefront of the European debt crisis. Italy is battling to get by without a bailout and Greece is seeking a second package.

Open, Transparent

Italy gets 13 percent of its imported crude from Iran, Monti said, making it more sensitive to a supply shock than other European countries. France, a prime backer of the ban, taps Iran for only 3 percent of its oil imports, he said.

“We have to encourage an open and transparent dialogue with Iran,” Monti said.

Rome-based Eni said on Dec. 8 it is owed less than $2 billion by Iran. A spokesman who requested anonymity declined to comment today when asked whether Eni would call for EU or Italian compensation if Iran repudiates that debt.

Italy’s objections to a blanket ban surfaced after Greece signaled that it is on board with the sanctions, the latest move to punish Iran for pursuing what the West says is a covert atomic-weapons program.

Greece relied on Iran for 14 percent of its oil imports in the first half of 2011, according to the U.S. Energy Department’s Energy Information Administration. After holding up an EU embargo last month, Greece has since decided to abide by any curbs, an official at the Greek Environment, Energy and Climate Ministry said on Jan. 3 on condition of anonymity.

The U.S. tightened its Iran sanctions on Dec. 31 and is pushing the EU to follow suit. “The place to get Iran’s attention is in the oil sector,” Victoria Nuland, a State Department spokeswoman, said yesterday in Washington.

Iran, the world’s third-largest oil exporter, denies Western contentions that it is seeking to build atomic weapons and says its nuclear experiments are for electricity generation.

--With assistance from Chiara Vasarri in Rome and David Lerman in Washington. Editors: Jennifer M. Freedman, Leon Mangasarian

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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