Iran halts oil sales to France, UK

photo_1329655937208-3-2-Quicklook.jpg“Oil sales to British and French companies have ceased,” Iran’s oil ministry said
AFP/File – Fred Tanneau

Iran announced on Sunday it halted its limited oil sales to France and Britain in retaliation for a phased EU ban on Iranian oil that is yet to take full effect.

“Oil sales to British and French companies have ceased,” oil ministry spokesman Ali Reza Nikzad Rahbar said in a statement on the ministry’s official website.

“We have taken steps to deliver our oil to other countries in the place of British and French companies,” he said.

The decision was not expected to have a big impact. France last year bought only three percent of its oil — 58,000 barrels a day — from the Islamic republic. Britain was believed to be no longer importing Iranian oil.

But it was seen as a warning shot to other EU nations that are bigger consumers of Iranian oil, including Italy, Spain and Greece.

Although those countries were not affected by Iran’s announcement on Sunday, they are included in an EU decision to stop buying Iranian oil that was announced last month and which will take full effect from July.

The EU move was part of a ratcheting up of Western economic sanctions on Iran over its disputed nuclear programme. Many Western nations fear the programme masks a drive to develop nuclear weapons, but Tehran denies that.

According to the International Energy Agency, Italy sourced 13 percent of its oil, or 185,000 barrels per day, from Iran, while Spain imported 12 percent of its oil needs, or 161,000 bpd, and Greece bought 30 percent of its needs, or 103,000 bpd.

Iran, OPEC’s second-biggest exporter after Saudi Arabia, pumps 3.5 million bpd of which it exports 2.5 million bpd.

Seventy percent of the exports go to Asian countries, China and India especially. More than 20 percent, or around 600,000 bpd, go to the European Union.

Iran has been threatening for weeks to cut all oil exports to Europe because of the EU ban, but has thus far held off. Ceasing all exports to the EU would harm its own economy unless it had Asian buyers ready to pick up the contracts.

Last Wednesday, the foreign ministry “invited” the ambassadors of France, Greece, Italy, the Netherlands, Portugal and Spain to individual meetings to explain to them that Iran “will revise” its oil sales to their countries.

Oil prices spiked on the warning, driven higher by an incorrect report on an Iranian television network, Press TV, that the halt in exports to the EU had already been implemented.

Iran’s government then said it would not stop exports “at the moment.”

But a foreign ministry official, Hassan Tajik, was quoted as saying: “Our message is that we can immediately replace our oil customers.”

The European Commission said that even if Iran did cut its sales to the European Union, it would make little difference as EU buyers were already switching suppliers, particularly towards Saudi Arabia.

Iran has reacted furiously to a promise by Saudi Arabia — a US ally and longtime rival in the Middle East — that it will step in to pump more oil to compensate for any loss to the market from curbed Iranian exports.

Such a move would be viewed as “unfriendly,” Tehran warned.

Iran’s decision to cut exports to France and Britain will be digested by oil traders on Monday.

In part because of the simmering geopolitical tensions over Iran, oil prices already jumped to a nine-month high on Friday before settling back a bit.

New York’s main contract, West Texas Intermediate (WTI) light sweet crude for delivery in March, was trading at $103.24 a barrel, while in London, Brent North Sea crude for April delivery was selling for $119.58 a barrel.

“According to industry sources, the leading European oil companies have slashed their March oil imports from Iran by more than 300,000 barrels per day. This is prompting additional demand for alternative oil types and is thus causing prices to rise,” explained Commerzbank analyst Carsten Fritsch.

“Ongoing Iranian tensions and the threat of disruption to oil supplies continue to be the main driver in the oil price,” said VTB Capital economist Neil MacKinnon.

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