Bloomberg News

EU Hits Iran With Oil Ban, Asset Freeze Over Nuclear Effort

January 25, 2012

(Adds details of asset freeze in eighth paragraph.)

Jan. 24 (Bloomberg) -- European Union foreign ministers agreed to ban oil imports from Iran starting July 1 as part of efforts to ratchet up pressure on the Persian Gulf nation’s nuclear program, the 27-nation bloc said in a statement.

The EU will freeze assets in Europe of the Iranian central bank as well as of eight other entities and ban trade in gold, precious metals, diamonds and petrochemical products from Iran. The Iranian Foreign Ministry in a statement called the decision “aggressive” and said it will have “negative consequences” in Europe, including higher oil prices.

Among the entities are Bank Tejarat, the last major Iranian bank financing large-volume trade in Europe. Also sanctioned is port company Tidewater, owned by the Islamic Revolutionary Guard Corps, which operates about 90 percent of Iran’s container ports, according to U.K Embassy spokesman James Barbour in Washington.

“These EU sanctions will hurt Iran very deeply,” Shada Islam, Middle East and Asia analyst at the Friends of Europe policy group in Brussels, said in an interview. “To be really effective, however, the EU and the U.S. must also try and get key Asian countries, including China, on board.”

An Iranian foreign ministry official said the pressure won’t force Iran to change its actions. Sanctions have “proved ineffective in the past and will prove futile in the future,” said Abbas Aragchi, a deputy foreign minister, according to the official state-run Islamic Republic News Agency.

The EU said yesterday in Brussels that its actions “target the sources of the finance for the nuclear program, complementing already existing sanctions.”

Asset Freeze

The asset freeze also applies to Sad Export Import Co., a front company involved in arms transfers to Syria, the EU said today in its Official Journal. Other entities subject to restrictions include Darya Delalan Sefid Khazar Shipping Co., which is owned or controlled by Islamic Republic of Iran Shipping Lines, and Behnam Sahriyari Trading Co., which sent containers of firearms to Syria in May 2007.

Japanese Foreign Minister Koichiro Gemba today called the EU ban “quite drastic” and differs from Japan’s plan to gradually cut purchases of Iranian crude.

New contracts on oil imports from Iran and extensions of existing deals will be banned, the EU said. Shipments under agreements already in place can continue until July 1. The EU measures against Iran also include a ban on the export of equipment and technology for the Iranian petrochemical industry.

Oil Prices

Crude for March delivery was little changed at $99.66 a barrel at 1:37 p.m. Tokyo time, in electronic trading on the New York Mercantile Exchange. The contract earlier increased as much as 0.4 percent to $99.98.

The Iranian Navy didn’t harass the USS Abraham Lincoln, an aircraft carrier, as it went through the Strait of Hormuz into the Persian Gulf on Jan. 22, Pentagon spokesman Navy Captain John Kirby told reporters yesterday. The Lincoln replaced the USS John Stennis, which left the area on Dec. 27.

“HMS Argyll and a French vessel joined a U.S. carrier group transiting through the Strait of Hormuz, to underline the unwavering international commitment to maintaining rights of passage under international law,” the U.K. Ministry of Defense said in an e-mailed statement from London.

The acting commander of the Islamic Revolutionary Guards Corps, Brigadier-General Hossein Salami, said Jan. 21 the U.S. Navy has deployed warships in the region “for a long time” and the current situation “is not new,” according to IRNA.

Less Confrontational

His remarks were less confrontational than those of Mohammad Kowsari, deputy head of the Parliament’s National Security and Foreign Policy commission, who was cited by the state-run Fars news agency as saying Iran will “certainly close the Strait of Hormuz” if sanctions “interrupt” its oil exports. About 20 percent of globally traded oil transits the Persian Gulf passageway.

“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 yesterday.

The U.S. and EU say Iran’s nuclear-development plans are aimed at gaining atomic weapons capability. The Islamic republic, the second-largest oil producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, is already under four rounds of UN sanctions and says its nuclear program is for civilian energy and medical purposes.

The International Atomic Energy Agency said yesterday it will send inspectors to Iran Jan. 29 to Jan. 31 in an effort to resolve questions raised by its nuclear activities.

‘Failed’

“The Iranian leadership has failed to restore international confidence in the exclusively peaceful nature of its nuclear program,” said U.K. Prime Minister David Cameron, French President Nicolas Sarkozy and German Chancellor Angela Merkel in a joint statement. “We will not accept Iran acquiring a nuclear weapon.”

In Washington, President Barack Obama welcomed the EU move as demonstrating “once more the unity of the international community in addressing the serious threat presented by Iran’s nuclear program.”

The U.S. “will continue to increase the pressure unless Iran acts to change course and comply with its international obligations,” he said in a written statement.

While the EU decision yesterday will be binding on member states, a separate regulation is needed for it to become binding on companies. The European Commission, the EU’s regulatory arm, is expected to offer a draft rule on that matter within days, according to an EU diplomat.

Mediterranean Stance

Mediterranean countries that import much of their crude from Iran, such as Greece, Spain and Italy, had argued for sanctions to be phased in over as much as a year. Both Spain and Italy get 13 percent of their crude imports from Iran, according to the U.S.’s Energy Information Administration.

The U.K. and Germany, which have also sought swifter sanctions, get only 1 percent of their oil imports from the Islamic republic, while France gets 4 percent.

Spanish Foreign Minister Jose Manuel Garcia-Margallo told reporters in Brussels yesterday that Saudi Arabian officials told him they will make up for supply shortfalls.

In addition to the four sets of UN sanctions, Iran is under other U.S. and EU restrictions.

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.

The EU imported 14.5 billion euros ($18.9 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.

--With assistance from Emma Ross-Thomas in Madrid, James G. Neuger in Brussels, Nicole Gaouette, Viola Gienger, Tony Capaccio, Indira A.R. Lakshmanan and Terry Atlas in Washington, Rachel Graham, Grant Smith, Stephen Voss and Caroline Alexander in London, Ladane Nasseri in Tehran and Patrick Harrington and Sachiko Sakamaki in Tokyo. Editors: Terry Atlas, Patrick Harrington

To contact the reporters on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net; Gregory Viscusi in Paris at gviscusi@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; John Walcott at jwalcott9@bloomberg.net


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