By LAURENCE NORMAN and BENOIT FAUCON
European Union member states agreed in principle to press
ahead with an oil embargo on Iran over its nuclear program,
diplomats said Wednesday, in a move that pushed oil prices
However, significant differences remain over details of the
plan, including the timing for implementing the measures, the
"There is a political deal in principle," one EU diplomat said
of the plan.
EU foreign ministers said in early December they were mulling a
broad extension of Iran sanctions aimed at "severely affecting"
Iran's financial, energy and transport sectors.
Diplomats said there was no deal yet on another measure
under study - slapping an asset freeze on Iran's central bank.
A decision is due by end-January.
The European Union imports nearly
600,000 bpd of Iranian crude, the International Energy Agency
said in its latest monthly oil-market report.
An oil embargo would be the latest step in international
efforts to isolate Tehran economically over concerns Iran is
trying to develop nuclear weapons.
On Dec. 31, US President Barack Obama signed into law a bill
which sanctions financial institutions that deal with Iran's
The oil embargo was proposed by France in December and had
backing from the UK and Germany, but Greece had openly opposed
the plan and some other member states were said to be cautious
about moving too quickly.
But early Wednesday, a Greek government source told
Dow Jones Newswires Athens wouldn't stand in
the way of an embargo.
But diplomats said there are still significant issues to be
agreed, including when the embargo would start and what to do
about existing contracts.
One person said to win the backing of those who were opposed,
the EU would likely agree that all existing contracts would be
allowed to run to maturity.
However, others said that was still being debated and one
diplomat called such a long implementation period as a
European benchmark Brent jumped to a two-month high of
$113.97/bbl after the announcement, while Nymex crude traded at
its highest since May.
However with the deal lacking details, the front-month
February Brent contract on London's ICE futures exchange was 62
cents, or 0.6%, higher at $112.75/bbl in mid-afternoon.
Some of the European doubts about an embargo
come from fears it would push up oil prices for some of
Europe's most fragile economies. Greece, Italy and Spain import
significant amounts of crude from Iran.
Italian Prime Minister Mario Monti said last week he would back
further sanctions as long as they exclude oil supplies to
Italy's biggest energy company which constitute repayment for
work the firm has carried out in the Islamic republic.
Italian oil company Eni
has said it is owed nearly $2 billion by Iran to be repaid in
An Iranian oil official said Wednesday the move would be
detrimental to Europe and Tehran could find new outlets for its
Europe is "falling into a trap that is not for the benefit of
the European people," he said.
But the official admitted "it will be a bit more difficult to
dispose of these barrels."
Indeed, experts say the embargo would hurt Iranian oil
revenues, while the EU diplomats said Brussels is working with
the US on plans to find alternative crude supplies.
If Europe implements an embargo, "there
will be 600,000 barrels a day looking for a new home, and it's
not going to Korea or Japan," said Trevor Houser, a partner at
New York-based economic research firm Rhodium Group.
In that case, Iran "would have to offer discounts to get
Chinese or Indian refineries to buy the
additional crude," Houser said.
Meanwhile, diplomats said member states haven't yet agreed in
principle on whether to push ahead with sanctions on Iran's
An options paper from the EU's foreign service unit lays out
three basic approaches, a diplomat said - a complete asset
freeze on the bank, further sanctions on non-central bank
financial institutions, and a third option which would ban
certain transactions with Iran's central bank.
Dow Jones Newswires