Daily Israel Report

EU Oil Boycott on Iran Intended to Force Tehran into Real Talks

The EU boycott on Iran will not come into effect immediately and it has many loose ends. Iran is given a chance to engage seriously.
By Amiel Ungar
First Publish: 1/6/2012, 4:46 AM

Israel National News has frequently taken a cynical appraisal of the European Union's motivations in the Middle East and that cynicism was not groundless.

Nevertheless, if the European Union does go ahead and implement sanctions on the purchase of Iranian oil, this could prove a game changer in the sanctions regime. If a second tier of states namely India, Japan and South Korea join in, so much the better.

Even if China remains a loyal purchaser, it will exact a price. In the past 2 months China has cut oil purchases from Iran. This reflects the Chinese appraisal that it is entitled to better terms. China is requesting an additional month of credit on its oil purchases –three months instead of two months. When dealing with billions, flexible credit terms can come down to a hefty chunk of cash.

The main question is will the European sanctions actually kick in? Countries that have signed long-term arrangements with Iran are requesting a waiver to avoid costly penalties. Countries that are used to importing Iranian oil would like to be sure that their energy security is assured and alternative sources will be on tap.

It will be very interesting to watch the actions of Saudi Arabia and the other Gulf states as the crisis plays out. These countries fear Iran's growing strength and can be regarded as direct beneficiaries of the sanctions.

The French newspaper Le Figaro, with excellent connections with the government, cited French Foreign Minister Alain Juppé saying "Alternative solutions exist." It reports that negotiations have taken place in Saudi Arabia and that Riyadh will be willing to compensate the Europeans for their proven losses.

Turkey, a country that buys 30% of its energy requirements from Iran, intends to keep purchasing "until there is a new development." Turkey's position will be determined by how much wiggle room the United States allows it. As Turkey has basically given up hope and perhaps even the desire of joining the EU, it will be American pressure that is awaited in Ankara.

The time that will be required for the EU to secure complete agreement on the oil sanctions and have them come into effect is reminiscent of the Cold War.

In the 1980s Western Europe experienced stormy demonstrations over the NATO plan to station US missiles on European soil to respond to the Soviet missile buildup. The compromise decision that was eventually adopted was that the missile placement would go forward if during the interim the Soviet Union did not dismantle its missile force.

Now that the Iranians are asking for negotiations on their nuclear program, the Europeans are effectively telling them that they have opened a window of opportunity till the sanctions are effective, and if the time is put to good use their imposition can be obviated.