On Monday the European Union is expected to adopt an embargo against Iranian oil that will be phased-in over the next six months.
The sanctions are intended to get Iran to halt its nuclear program-particularly uranium enrichment- which the West believes is a guise for Tehran’s development of nuclear weapons. Iran denies these charges and maintains its nuclear program is entirely peaceful. A November report by the United Nations’ nuclear watchdog heightened Western concerns by citing a number of suspicious activities Iran has allegedly carried out at its nuclear sites. The International Atomic Energy Agency’s report stopped short of concluding that Iran was pursuing nuclear weapons.
In response to the report the U.S. and some of its EU allies have sought to increase the pressure on Iran by targeting its oil exports. Revenues from Iran’s oil and natural gas sales account for roughly 60 percent of government spending, 80 percent of the country’s hard currency and 90 percent of all export revenue.
Although the United States does not buy oil from Iran, Washington has sought to target Iran’s oil exports indirectly through its Central Bank, which facilitates most of the country’s energy deals. On New Year’s Eve President Obama signed into law new sanctions that close off the U.S. market to any business entity across the globe that continues to do business with Iran’s Central Bank. The bill is intended to force third parties to stop purchasing Iranian oil by forcing them to choose between continuing to do business in Iran (2009 GDP $331 billion) or doing business in the United States (2009 GDP $14 Trillion). The bill does allow President Obama to grant waivers to countries under some circumstances.
In contrast, the EU purchases roughly 20 percent of Iran’s total oil exports, and therefore can target Iranian oil directly. Greece, Spain and Italy are the EU’s main Iranian oil customers accounting for 68 percent of all of the EU’s purchases and Iranian oil constituting 34.2 percent of Greece’s total oil imports, 14.9 percent of Spain's and 12.4 percent of Italy's in the first nine months of 2011, according to EU statistics.
This reliance has pitted the three nations against the more globally active EU powers like France and Germany with regards to the oil embargo. The most contentious issue during the negotiations was how quickly the embargo would be implemented. Whereas France and Germany pushed for swift implementation Greece, Italy and Spain sought a more gradual implementation that allowed them to find alternative suppliers.
An EU foreign minister meeting on Thursday ended without a consensus being reached. By the end of the day on Friday, however, Greece was reportedly the only remaining hold out. Specifically, Athens sought assurances from the larger EU states that it would receive the same favorable financial terms from new supplies as it now gets from Iran. After receiving these assurances over the weekend, Greece agreed to phase-in the embargo over a six-month period, according to Bloomberg News.
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