ISSN 2330-717X

Iran: Myths And Consequences – OpEd


By Ilya Kharlamov

The West is stepping up efforts to tighten a grip on Iran in connection with its nuclear program.

The United States has slapped sanctions on foreign state-run banks that clinched oil deals with Tehran and imposed restrictions on the operations of private financial institutions cooperating with the Islamic Republic.

On July 1st, the European Union is launching an oil embargo against Iran. Such an abundance of “economic reprisals” against a major player on the world oil market could have lasting consequences.

No more new oil from Iran will be available in Europe after July 1st . Countries will have to rely on the Iranian oil which was purchased under previous contracts. Even crisis-struck Greece has been banned from importing Iranian oil on preferential terms. Washington’s restrictions on the banks that were “spotted” in partnership with Tehran pursue the same agenda – to slash sales of oil from Iran.

The restrictions in question have already had a negative effect on the social and economic situation in Iran, which has seen a rise in food prices and devaluation of national currency. However, the embargo on Iranian oil led to an increase in oil prices throughout the EU this spring, to the disappointment of millions of European consumers. Oil prices might hike again after July 1st . The EU countries account for 20% of Iranian oil exports, and this amounts to about 30 million tons. Europe expects Saudi Arabia to fill the gap. But Iran has all the resources to block the Strait of Hormuz through which oil from Saudi Arabia and liquefied gas from Qatar reach the world markets. As for Iran, it could offset its losses by supplying oil to other countries. This means that the embargo might not prove as effective as planned, Yevgeny Satanovsky of the Institute of the Middle East says.

“Some countries, including South Africa, have sharply increased Iranian oil imports. Consumption of Iranian oil has not dropped in Turkey. South Korea has cut Iranian oil supplies, but only slightly. The Indian companies have been reducing the consumption of Iranian oil in the country’s state sector but have been increasing it in the private sector. China, even though cutting Iranian oil supplies, has been exerting pressure on Iran to get it to slash oil prices so that Beijing could boost the consumption of Iranian oil for the same prices.”

As a result of the embargo, Iran will lose $20bn of the $100bn it receives from oil export annually. The loss is far from disastrous. In addition, sanctions will help to spur Iran’s efforts in other areas. Vitaly Bushuyev, General Director of the Institute of Energy Strategy, believes that the role of Iran in the formation of world oil prices has been exaggerated.

“No radical fluctuations on the oil market have been predicted for the near future. Oil prices will be ranging between $85 and $110. Iran may affect them but its influence won’t go further than causing one-time price volatility within a maximum variation of 3-5 dollars.”

In other words, the western sanctions against Iran will not trigger any upheavals on the world markets or an economic collapse in Iran. Instead, they could hit the wallets of ordinary people in Europe. US Secretary of State Hillary Clinton has said that unless Iran takes specific steps to dispel the international community’s concerns regarding its nuclear program, pressure on it will increase and it will become more and more isolated.

As an alternative to economic pressure, Washington might carry out air strikes against Iran’s military facilities. In this respect, the attempts to exert pressure on Tehran through sanctions are not the worst option.

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VOR, or the Voice of Russia, was the Russian government's international radio broadcasting service from 1993 until 2014, when it was reorganised as Radio Sputnik.

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