EU Advisor: EU likely to replace Iranian oil supplies

Azerbaijan, Baku, Dec. 7 / Trend D.Khatinoglu /

EU Economic Advisor Mehrdad Emadi says Iran's oil supply to the EU can be replaced by Iraq's and Saudi Arabia's.

"Over the last weeks, the EU's efforts of finding other oil supplier instead of Iran have been very productive for its member-countries. Along with Saudi Arabia and other countries, the EU has been successful in finding some suppliers," Emadi said in a phone interview with Trend .

The EU member-countries together believe that oil sanctions against Iran are necessary,

Günther Oettinger, the EU's energy commissioner, said at the World Petroleum Congress in Doha, Qatar yesterday. He added that such sanctions must extend to big countries outside the European Union.

"I think boycotting oil purchase is an important tool, but we must include all other large countries including the U.S and Russia to the list of those imposing sanctions," Ottinger said. "The more countries there are, the greater the impact will be." The U.S hasn't bought oil from Iran for more than 30 years and Russia is the world's second producer of oil.

European countries buy 450,000 barrels of the oil exported by Iran.

Emadi also mentioned the difference in the quality of Iran's oil compared to Saudi Arabia's one. "It's true that there is a difference in quality between Iran's oil and Saudi Arabia's one," he said.

According to Emadi, adapting the EU refineries to Saudi Arabia's super heavy crude oil will cost additional expenses for the EU. The cost of refining is very high for Saudi Arabia's oil. "However, the EU seems full of willingness to pay these costs because this case [boycott of Iran] is directly related to the EU's energy and economic security," he noted.

Saudi Arabia supplies five types of crude oil to international markets with up to 2 million surplus production capacity. Saudi Arabia's surplus crude oil is mostly super heavy and can't meet the world major demand for Iran's lighter crude oil.

At the same time, the EU is negotiating with Russia and Central Asian countries to buy crude oil and has been able to achieve significant agreements, Emadi added.

"Russia and Central Asia have made preliminary talks and they are currently negotiating about a reasonable price. If the talks are finalized, I should say that Iran will lose its European oil markets," Emadi said.

Although China and other Asian countries may buy large amounts of Iranian oil, but it would be costly for Iran to sell crude oil to such countries, Emadi said, adding that Iran does not receive international currencies in exchange for selling crude to China. They deal oil on yuan or on the bartering basis. The two methods both cost Iranian economy very much, because Iran can buy Chinese good against selling crude to China. The bartering contracts have damaged Iranian economy significantly, Emadi concluded.

Emadi thinks that Iranian crude will be replaced with Saudi Arabia's, although it will lead to increase in the global oil prices by 10-15 percent. But, the EU has the capacity to go on with the price rise. Emadi believes that boosting Iraqi crude oil supplies after January 2012, which is lighter than Iran's, can meet the EU's lighter oil demand.

Iraqi oil companies will soon emerge as new suppliers of crude oil to such new markets as Spain and Greece, he said.

Along with reducing Iranian crude oil exports to 2 million barrels per day, Iraq replaced Iran and was named the second OPEC exporter last month with supplies of 2.135 million barrels of crude oil a day on average, showing a 47,000 barrel-increase per day, Jahan-e Sanat newspaper reported.

Reuters reported that Saudi Arabia increase oil supplies to 10.047 million barrels per day.

Saudi oil supply in November was at 9.45 million bpd, up from 9.40 million bpd in October and 8.25 million bpd in November 2010.

According to Emadi, it will be difficult for the National Iranian Oil Company Iran to regain oil markets once it loses them. China, Japan, India and South Korea are currently the major importers of Iranian crude oil.

It is true that China and other Asian countries may buy large amounts of Iranian oil, but it would be costly for Iran to sell crude oil to such countries, Emadi said. Iran does not receive US dollars in payments for its crude sales to China. They deal oil on national currencies or barter it. The two methods both cost Iranian economy very much.

"Thus, the barter contracts have damaged Iranian economy significantly," Emadi concluded.

T.Jafarov, M.Moessi, F.Milad contributed to the article.

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