The
European Union's recent
agreement in principle to gradually ban Iranian crude oil imports has
brought to a head a long-running dispute between Europe's economic and foreign
ministries. Economic ministries feared politicizing oil because any disruption
could hurt fragile economies and send prices soaring. Foreign ministries, for
their part, were eager to turn the screws on Tehran with an oil embargo that
would raise the costs of the
country's alleged pursuit of nuclear weapons. This gap is narrowing fast --
but not only because of the urgency of increased diplomatic pressure.
EU ministers will discuss the embargo on
January 23 after two weeks of saber-rattling in the Persian Gulf. Iran's
leaders have directly linked restrictions on crude exports to the regime's willingness
to shut the Strait
of Hormuz. Last month, Mohammad-Reza
Rahimi, Iran's first vice president, warned that "If they impose sanctions
on Iran's oil exports, then even one drop of oil cannot flow from the Strait of
Hormuz." His comments came days before President Barack Obama approved new U.S.
sanctions against the Central Bank of Iran, which manages the country's oil
transactions.
The
stakes are high for Tehran. The regime depends on oil revenue for 50 percent of
its budget. Last year that sum amounted to $73 billion. Iran exports 450,000
barrels per day (b/d) to Europe, which amounts to 20 percent of the country's
total crude exports. Some observers worry that an EU embargo could backfire and
send oil prices sky-high. But these fears may be exaggerated.
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