EU Split on Iran Oil Embargo

EU Split on Iran Oil Embargo

The European Union is split over whether to press ahead with an Iranian oil import embargo, with European diplomats describing an intense debate on the matter ahead of a Thursday meeting of EU foreign ministers, The Wall Street Journal reported.

Iran and its nuclear program will top the agenda at Thursday's foreign ministers meeting in Brussels. EU foreign ministers are expected to add close to 200 Iranian companies and individuals to its sanctions list and will discuss the regional response to the attack on the British embassy in Tehran.

The foreign ministers are also set to expand sanctions on Syria, including slapping an export ban on equipment and software used for telecommunications and an export ban on key technology for the oil and gas sector. At least, 25 companies and individuals will be added to the current sanctions list, including financial and trade-related firms.

The agenda includes a discussion of the proposed Iranian oil embargo ban, an unprecedented potential step for Europe that has caught the attention of the oil market. But informal discussion in recent days has unearthed opposition from some EU members and unease from others, EU officials said.

Proponents of the embargo, such as France, had previously hoped that the official communique Thursday would include an agreement in principle by the EU to move ahead with the embargo. Advocates of the ban now consider such a decisive outcome less likely-at least on Thursday, according to Brussels officials.

The EU's foreign service has watered down its draft conclusions ahead of Thursday's meetings, two diplomats said. While the previous draft had foreign ministers warning of further financial, energy and other sanctions on Iran, including a possible oil embargo, the latest draft warns instead of measures which include "possible import restrictions."

"The question is how far and precise we are in mentioning additional sanctions," one person said.

Even if the EU does not sign off on the embargo, it is still expected to threaten future measures against Iran's banking, shipping and energy sectors.

The diplomats said opposition to the import ban was led by Greece, which is concerned about the cost of the measure on its already-pressured economy. Greece has also had traditionally good relations with its regional neighbors and was reluctant to sign onto the EU's Libya campaign.

A second diplomat said "a number of countries have been quite cautious" about referencing an oil import embargo in Thursday's statement, because of concerns an embargo would have on EU member states and the diplomatic message this would send to Iran.

"This has to be handled extremely delicately," the diplomat said. "Some countries want to press ahead with this. Others want to take a bit more time."

The import ban was proposed by the French government, and several diplomats said it is being backed by the U.K., Germany and the Netherlands among others. Ireland, Italy and Sweden are among the member states who are said to have expressed concerns, two diplomats said. Greece and Cyprus are more openly opposed, diplomats said.

A Greek foreign ministry spokesman and an Irish spokesperson in Brussels declined to comment. Spokesmen for the Italian and Cypriot EU embassy were not immediately available.

Several of the region's weakest economies, including Italy, Greece and Spain, import significant amounts of Iranian crude oil. Greece has recently boosted imports of Iranian oil because it is cheaper than the Russian crude it normally uses, Mediterranean oil traders and shipping professionals said. Iran accounted for 5.7% of EU oil imports in 2010, according to Fitch Ratings service.

The push for wider sanctions comes after the International Atomic Energy Association this month said it was "profoundly and increasingly worried" about Iran's alleged attempt at building a nuclear weapon. Iran says its nuclear program is for peaceful purposes.

Iran's oil minister, Rostam Ghasemi has downplayed the threat of an EU oil embargo, according to Fars news agency.

On Wednesday, Fitch said an EU oil embargo would have a "much smaller negative impact" on European oil companies than the recent Libyan crisis because upstream oil production is "negligible." Most European exposure to Iran's oil sector is through refining operations.

However Fitch warned the ban would likely result in higher prices for refiners which would be "partially passed on to customers."

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