Editor in Chief: Moh. Reza Huwaida Friday, March 29th, 2024

Tehran’s Warning about Oil Supply to the EU

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Tehran’s Warning about Oil Supply to the EU

Tehran has warned the European countries that it would cut off oil supply unless they lift the oil-embargo imposed last month against the country. The sanction came after the US fresh round economic sanctions which directly targeted Central Bank, Bank of Tejarat and other financial institutions which are blamed on the account of linkage with nuclear program.

Tehran has always made mockery of international and unilateral sanctions saying they wouldn't prove damaging for its economy. During years, it has responded to sanctions in defiance and did not give up its controversial nuclear program, which is the principle reason behind unilateral and international sanctions.

No doubt, Iran has developed dramatically since the Islamic revolution. High annual economic growth rate set the country among one of the fastest growing economy in the world. But, unlike many others, its economy largely depends on the oil and gas industry. Annually billions of dollars are poured in from the sale of oil and gas and billions are invested by foreign companies in these sectors. This wind-fall wealth has fuelled economic development and prosperity. The shaky houses have given place to luxurious apartments and villas. Like other neighboring oil producing countries, skyscrapers have become characteristic of big cities.

Similar changes have taken place in its global status. It is a lucrative market for many industrial countries and its rich natural resources built up close and powerful allies across the globe. Its trade partners several times used their influence to ban tough resolution against the country.

Thus, years of controversy with the West has not led into isolation as it would have done if it did not have bigger share in the energy market. Though several resolutions passed against in United Nations Security Council, but they were not, at least western countries deem so, tough enough to get the country give up to its nuclear ambition. They imposed unilateral economic sanctions against the country during past years, but oil embargo was off the table. Even supporter of severe step did not put oil embargo on the negotiating table few years ago.

The situation has changed tremendously as the imposition of sanction last month by European Union did not come with much surprise because it was largely expected that they may follow the US if Tehran did not meet the concerns largely raised by the last IAEA's report.

Thus, Iran-West brinkmanship has entered into a new period, which would cause energy-supply panic in the future if Tehran really tries to cut off its oil supply to EU which is still the biggest oil consumer. Iran with large oil and gas reserves does play effective role in the energy market. Tehran is one of the largest oil producers as well as exporter which helped the country to refurbish over consumers' dollar. In another word, due to its large oil and gas reserves, energy hungry countries have tried their best to maintain relation to a convenient level in order to ensure continuous energy supply into their markets.

On the other hand, Tehran has always used its natural reserves for political and diplomatic brinkmanship. It has tried to build close relation with countries which are in due need of energy and can lighten the burden of global sanctions.

Moreover, though EU has been the biggest Iran's oil costumer, but due to its controversy with western countries, it has shifted toward oil hungry Asian countries. Now India, China, Japan and South Korea are the main trade partners which can play quite important role directly or indirectly in affecting any possible punitive resolution put in the United Nations Security Council.

Therefore, no matter to what extent the United States of America and its allies push for tough resolution against Iran, major countries stands in opposite and do not allow the storm hit hard. It should be noticed, in spite of oppositions, several resolutions have been passed which restrict technological, political and economic ties with the country. Those resolutions made many to alarm Iran that its energy lobby would not work in the case for its allies remain no choice ahead.
Since the imposition of economic sanction by EU against the country, Tehran officials did not show any flexibility over nuclear program rather warned to close strait of Hurmoz and cut off oil supply to EU. The warning has poked the ticking beat of energy market with nil, but experts maintain the panic would not last long as there are enough reserves to meet the global energy demand.

But there is one thing, which needs to be noticed and that is the EU may not step back and call off the previously approved unilateral sanction. So, why Teheran officials give warnings to cut off oil supply if member countries do not reassess their measure?

I already wrote much about confidence of the EU members about fill-up of the energy gap would be created after getting Islamic republic out of the EU market. I noticed it was not European Union and US that are worried about Iran's nuclear program, neighboring countries are on the top of the list. According to US classified reports released by Wiki-leaks there are signs of worried Arab neighbors as some of the officials asked for military intervention.

So it is clear that the EU may not call off economic sanctions unless serious steps are taken by Tehran over its controversial nuclear program, the thing which would not do so because it has moved on the irreversible track.

Perhaps, there are various reasons. Two main reasons are as follows: officials are really worried about the oil embargo that would prove consequential and second sending electric shock to fuel market in order to mount pressure on those EU members that are the main customers.

In the first case, it is likely that EU economic sanctions find among the rest of countries and they try to restrict their relation in order not to touch the hot spot of EU.
In the second place, Islamic republic did not expect much that its EU partners may yield to general demand and thus try to fuel energy market through warning about stopping supply entirely.

Jawad Rahmani is the permanent writer of the Daily Outlook Afghanistan. He can be reached at jawad_rahmani2001@yahoo.com

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