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      EU Tightens Belt on Iranian Oil

      The European Union has tightened its belt and prepared to cut its consumption of Iranian oil, with sanctions affecting others as well.
      By Chana Ya'ar
      First Publish: 2/27/2012, 10:53 PM

      Iranian oil rig equipment
      Iranian oil rig equipment
      Reuters

      EU officials said Monday they will voluntarily cut imports of Iranian crude by one third, starting March 1, with sanctions affecting others as well.

      Instead of the standard import of 740,000 barrels, imported in the same period last year, EU importers said they would limit themselves next month to a mere 425,000 barrels of oil.

      The reduction is considered an appetizer to the full entree, a complete boycott of Iranian oil, which is set to begin on July 1.

      Iran will face a further economic decline when it is also forced to contend with a ten percent reduction in oil imports from its three biggest customers in Asia as well: China, India and Japan.

      All three have decided to begin to purchase at least some of their crude from Saudi Arabia, Libya, and other nations, at the urging of the United States.

      The EU sanctions have affected Asian importers primarily because they are involved in financing and/or insuring some of the 95 percent of tankers that carry oil around the world, which are re-insured through the London-based International Group of P&I Clubs.

      Chinese and Japanese groups that insure the tankers against oil spills and other risks on the high seas will simply no longer be able to cover the vessels carrying the Iranian crude, due to the EU sanctions, which affect the purchase, transportation, financing and insurance of the oil.

      Last month Iran produced 3.55 million barrels of oil per day, about four percent of global output, according to the International Energy Agency, and an estimate by Bloomberg. Japan imported about 14 percent of Iran's output, and China purchased approximately 22 percent of its export, according to U.S. Department of Energy estimates.