In a bid to dissuade Iran from its current nuclear program believed to be for military use, the foreign ministers of the 27 EU member states meeting in Brussels today resolved to embargo Iranian oil imports from 1 July.
EU officials said they also agreed to freeze the assets of Iran’s central bank and ban trade in gold and other precious metals with the bank and a list of state companies. A summary of the sanctions is available via Reuters.
Tehran had previous threatened to close the Strait of Hormuz, a chokepoint for 20% of world oil exports and a sizeable amount of liquefied natural gas, if sanctions were agreed, but so far no interdiction in the Strait has been reported. The regime denies the accuracy of a recent International Atomic Energy Agency Report which says there is evidence that Iran is developing a nuclear weapons program and that the country is in default of its obligations under international nuclear non-proliferation treaties.
A blockade with trap most of the oil and gas exports of Iraq, Kuwait, Bahrain, Saudi Arabia, the UAE, Qatar – only a few of whom have limited options to re-route exports – and Iran itself.
As such, any closure of the Strait – for however long Iran is able to maintain it- would be profoundly damaging for the Iranian economy, the majority of which is dependent on oil, and which is already hobbled by a profound declension in the value of the Iranian Rial and extant economic sanctions.
According to a Reuters report, EU foreign policy chief Catherine Ashton said: “I want the pressure of these sanctions to result in negotiations. I want to see Iran come back to the table and either pick up all the ideas that we left on the table … last year … or to come forward with its own ideas.”
The difficult task ahead for EU countries is how to now use the looming sanctions to prevent Iran for pursuing a nuclear weapons program it does not admit that it has, and to increase political pressure on Mahmoud Ahmadinejad’s regime by dividing Tehran from Iranians instead of uniting them under animosity for a part of the international community that has already sharply reduced their spending power.
Iran politicians vented anger at the news, with one suggesting the Strait should be closed immediately and Iran should cease trading with the EU now to maximize economic disruption to the troubled Eurozone.
“The best way is to stop exporting oil ourselves before the end of this six months and before the implementation of the plan,” said Tehran’s Council of Experts member Ali Fallahian, according to the state Fars news agency.
The USS Abraham Lincoln, an aircraft carrier, today entered the Strait, flanked by British and European naval vessels, in a show of strength timed to dissuade Tehran from any military reaction to the news.
Oil markets seem to have priced in the sanctions package decided, with dated Brent stable at the time of writing at $111 a barrel.
