Iran drives Europe into a corner

The European Union has decided to impose new sanctions on Iran designed to force the country to curtail its nuclear program. The most painful point is the rejection of the supply of Iranian oil, which will result in irreparable damage to oil exports, as it accounts for half of the budget revenues of Tehran. How would Ayatollah respond to the West?

The list of sanctions consists of twenty items, the most painful of which will be the rejection of the supply of Iranian oil. According to the authors of the sanctions, it will force the regime of Ayatollah to either accept the West's nuclear program, or make suggestions that would suit the Western leaders. However, it is doubtful that would happen.

First, it appears that in spite of their desire to punish Ayatollah, the European officials punished the Greeks, Spaniards and Italians - nearly all of the unfortunate quartet PIGS, whose stupidity and greed initiated the current economic crisis in Europe. These countries consume the lion's share of Iranian oil flowing to the EU. No wonder Greece, third of whose energy demand is covered by Iranian oil, until recently, sought to delay the embargo at least by a year.

For Tehran this decision, though unpleasant, is not fatal. One does not have to be a great military strategist to predict the actions of the Western politicians in the event of deterioration of the situation. The oil embargo had already happened in the history of this conflict, and this time the Iranians had time to prepare for it. Despite the fact that the country is really dependent on oil, energy exports are diversified among customers, who sometimes have very different interests.

The EU uses approximately 600,000 barrels of oil (20 percent of the Iranian exports), but China alone imports nearly as much (550 thousand barrels per day). Other large consumers of Iranian oil are Japan, India, South Korea, and they are not going to abandon the supply. Who should Iran bet on at a time when the West has virtually no industry left and the raging economic crisis, while Asia, if not increasing, then, at least, is keeping its growth at a steady pace?

The Ministry of Petroleum Industry of Iran has already declared that the embargo did not come as a shock and that they have developed alternative solutions in preparation for this outcome. A spokesman for the Foreign Ministry Ramin Mehmanparast advised the European countries and those under American pressure to think about their own interests. The importers that remove themselves from Iran's energy market will soon see that their place was taken by others. The EU gave Tehran six months (the embargo fully takes effect only on July 1, and until then the EU will be choosing the energy supplier from previous contracts), so the Iranian oil industry has time to find a replacement for the unruly customers.

Would Tehran be willing to use these six months? The Iranian elite already heard some suggestions to give an immediate answer to the embargo by shutting off oil and petroleum products to Europe, which will not make the Greeks and Italians happy. Even considering the "soft" option of imposing sanctions it will be difficult to recover the economies of these countries that would have to contend with an increase in oil prices, while searching for alternative suppliers. The latter, in turn, are unlikely to not take advantage of the situation. However, EU officials, apparently, decided to sacrifice the future bankrupts, placing an additional burden on them.

Meanwhile, the rise in price of oil has become a reality as early as Monday: a barrel of Brent crude jumped to $100, and some experts believe it will reach $200 if the confrontation escalates. There is another sad scenario in which Iran fulfills its threat to obstruct the Strait of Hormuz used to transport up to forty percent of world exports of petroleum and petroleum products. This is the second consequence of the EU's decision that would affect not only the Europeans.

Third, the sanctions are the response to their ideological inspiration in the USA. Under a threat of blocking transactions of its Central Bank, Tehran is transferring to transactions in Rial and the national currencies of the counterparties. Such agreements have been already reached with India and Turkey, with Russia to follow. The process of replacing the US dollar as a reserve currency for transactions has been ongoing for a while and was not started by Iran. However, the Americans are unlikely to be thankful to their allies for the acceleration of the issue.

Brussels sanctions did achieve certain results. In spite of all assurances of the Western politicians of love to the Iranian people, ordinary people have already felt its effects. Rial has been crushed by speculators, and on Tuesday prices for basic necessities increased, and even at higher prices they are difficult to get. This means that the situation is worsening for the ordinary people both in Iran and Greece, which is likely to be the only serious consequence of the embargo. No matter how good the rhetoric of Brussels, the results do not lead to anything other than further deterioration, including, first and foremost - for Brussels itself.

Ilya Nikonov.

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Author`s name Dmitry Sudakov