- Title: VARIOUS: Oil could be used as a weapon in the Iran Nuclear debate.
- Date: 18th January 2006
- Summary: (BN01)NEW YORK CITY, NEW YORK, USA (AUGUST 30, 2005) (REUTERS) PULL BACK FROM VARIOUS OF OIL TRADERS ON THE NEW YORK MERCANTILE EXCHANGE
- Embargoed: 2nd February 2006 12:00
- Topics: International Relations,Industry
- Reuters ID: LVA13FRC74HC3XMZB6FUOTOFU82V
- Story Text: The debate over Iran hinges on its nuclear intentions, but the nation already wields a potent weapon called oil. It exports around 2.4 million barrels per day, and if it were not in the market, experts say world prices could hit $100 per barrel.
The resumption of nuclear research in Iran, which the U.S. fears could lead to nuclear weapons, has sparked a flurry of Western diplomacy in pursuit of a vote by the U.N. nuclear watchdog referring Tehran to the UN Security Council for possible sanctions.
Tehran has denied it is seeking nuclear weapons and says it needs nuclear technology to generate electricity.
"It's almost certain to go to the UN, probably by February, certainly by March and that will be the big show down: Do the Nations agree that it is the time to sanction Iran? Which could lead to a crisis perhaps, military -- or is there some diplomatic agreement reached to avert that crisis," said Joseph Cirincione of the Carnegie Endowment for International Peace.
As the United States and its European Union allies lose patience with the Islamic Republic, President Mahmoud Ahmadinejad has kept the world guessing as to whether the world's fourth biggest crude exporter would withhold supplies.
Oil markets have taken the point, with crude trading above $65 on concerns about Iran as well as some lost output in Nigeria. Traders say the mere possibility of an Iranian interruption will add to tension for months to come.
"Putting an embargo on the purchase of Iranian oil is the ultimate sanction. Its a very risky sanction . It hurts Iran tremendously but it also hurts all of the Western economics, and Japan, India, that depend of Iranian oil. So, I think it is very unlikely that we are going to see that option develop. You might think of oil as a sanction as the nuclear option here," Cirincione said.
And when it comes to the UN and oil related sanctions, the record is not entirely promising.
"We certainly don't want a repeat in any sense of the oil for food kind of issue we had with Iraq. I say that not just because of the scandal of it at the UN, but also because what we saw in oil for for was at least a pretty good indication of as policy that really crippled the Iraqi people without hurting the revenue of Saddam Hussein," said Tod Lindberg, a fellow at the Hoover Institute.
China, a key oil buyer from Iran and permanent member of the Security Council, has said it would prefer the case to be solved outside the world body.
Actual disruptions would be hard, if not impossible, for the world to cover with the Organization of the Petroleum Exporting Countries holding only
5 million barrels per day in reserve.
While analysts see only a remote chance of the U.N. imposing a blanket embargo on Iranian crude, they see higher odds for a defiant Tehran purposely withdrawing oil from the 85 million bpd world market.
Iran, which amassed a $40 billion war chest from export revenues last year, could afford a short break in oil sales.
Some analysts insist Tehran will not unsheathe the oil weapon for fear it destroys credibility with international oil firms and banks and damages trade relations with other countries.
But with Ahmadinejad, who has incurred Western wrath with his outspoken remarks against Israel, the world has come to expect the unexpected.
Standing up to Washington and its allies by halting oil exports may win points at home, but the oil weapon could prove a blunt instrument in the end.
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