(Updates to recast headline and first paragraph, adds more on timing in fourth and fifth paragraphs.)
Jan. 6 (Bloomberg) -- The European Union is weighing the potential effects of an oil embargo on Iran against the risk of a nuclear arms race in the Middle East, Denmark’s Foreign Minister Villy Soevndal said.
“We’re definitely assessing all consequences of an embargo,” Soevndal, whose government this month took over EU’s rotating presidency, said today in Copenhagen. “But regardless of their impact, what is at risk is that an Iran with nuclear weapons will spur a weapons of mass destruction arms race in the Middle East, which could see first the Saudis and possibly the Turks getting nukes. And then the situation is way out of control.”
The EU may agree to an embargo on Iranian oil at a meeting Jan. 30, officials said this week. U.S. sanctions imposed last year seek to cut off dealings with Iran’s banking system, making it difficult for consumers to buy the country’s oil, in an effort to force Iran to abandon nuclear work that the U.S. and allies say may be intended for weapons development.
An embargo will probably be phased in to protect countries with the greatest reliance on imports from Iran, an EU official familiar with the talks said today. Countries with the biggest dependence on Iranian oil, including Italy, Greece and Spain, have raised concerns over how existing contracts should be treated when the embargo is imposed, the official said.
Strait of Hormuz
Soevndal said they will discuss whether to implement sanctions right away or gradually at the Jan. 30 meeting.
Iran threatened last month to shut the Strait of Hormuz, a transit point for a fifth of oil traded worldwide, if sanctions are imposed on its crude exports. Concern that supplies may be disrupted helped boost oil prices, with Brent crude advancing 3.5 percent this week.
The Iranian Revolutionary Guard Corps will hold large-scale exercises in the Strait of Hormuz and the Persian Gulf next month as tensions mount. The drills will be the “greatest naval war games” to be conducted by the Iranian military’s elite corps, Brigadier General Ahmad Vahidi, the defense minister, was cited as saying by the state-run Fars news agency.
The EU and the U.S. are joined by the United Nations in levying punitive measures on Iran over the nuclear program. Iran says its nuclear efforts are for civilian purposes and to generate electricity.
“One of the reasons we’re seeing the saber rattling around the Hormuz Strait is that the current sanctions are working and that Iran is afraid the oil sanctions will also work,” said Soevndal.
--With assistance by Thomas Penny in London, Editors: Jonas Bergman, Christian Wienberg
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