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‘We don’t need to sell oil to Europe’

The veiled threat by an Iranian politician that he and fellow-parliamentarians might consider a move in the Majlis in Tehran on Sunday to put embargo on oil exports to the European Union member countries even 6 months ahead of the EU’s sanctions come into force, has already set alarm bells ringing in western capitals. 

By the way, if there is any reason to doubt Iran’s capacity to create havoc in Europe, you just have to tune into the hundreds of thousands of demonstrators — estimated to number 200000 — taking to the streets in Alicante, Castellon and Valencia in eastern Spain on Thursday to realise the nature of the volcano that is threatening to erupt in many european countries if the prevailing economic crisis deepens. 
There is nervous laughter as this AP commentary testifies. Tension will mount in countries like Greece, Italy and others to whom Iran is a major supplier, even as the Majlis in Tehran begins debating on Sunday to halt oil exports ahead of the EU’s 6-month phase-in plan of sanctions. The best threat Europeans can think of giving to Iran is that ‘we both are going to get hurt’. 
Whereas, they are wrong here, too. The hard fact is that if oil prices spiral upward, Iran can sell its oil at a pinch with discount and still recoup the income needed to balance its budget. President Mahmoud Ahmedinejad said, “It is the West that needs Iran and the Iranian nation will not lose from the sanctions. There was a time when 90 percent of our trade was with the Europeans. It has now dropped to 10 percent. We didn’t call for this. Cut it [EU's trade with Iran] and let’s see who will incur the loss.” 
The government-owned China Daily’s apt captioning of the report on Ahmedinejad captures it all — “Iran: ‘We do not need to sell oil to Europe”. To be sure, not only European capitals, but Beijing is also keenly watching. Actually, even without the Iranian warning, oil prices rose in Asia on Thursday on account of the US Federal Reserve decision to keep interest rates low through 2014. ‘Oil at $110′, AFP reported from Singapore. 
To calm the nerves in Europe, EU commissioner Guenther Oettinger says it is possible in principle that some European countries may not hesitate to tap into their strategic oil reserves to make up for Iranian oil. Pray, Mr. Oettinger, which European countries do you have in mind? Did they tell you to say so? No, Sir. They aren’t fighting a war. This is a self-inflicted hurt, Mr. Oettinger. Why should your own country Germany salvage Greece for this exceedingly foolish decision on Iran sanctions that the US and France inflicted on the EU, by drawing down on Berlin’s own strategic reserves?Besides, drawing out of strategic reserves can at best be a temporary palliative. 
And for how long can it be sustained as a forced measure? The Iran nuclear problem isn’t going to be resolved anytime soon unless there is a sea change in the US’s regional policies, which is almost impossible, given the realities of the US domestic politics and the dysfunctional state of the American political system. Clearly, Oettinger, whose pro-US credentials are well-known, is bluffing. 
But this is not the stuff of bluster. The past 24 hours have shown that Iran has driven up prices by $5 to $10 higher despite a weak demand for petroleum products amid the deep recession in Europe. The point is, the oil market has to price in all eventualities and that works to Iran’s advantages, as even a chance remark in Tehran impacts in the current circumstances of heightened tension. Even an odd statement by an Iranian politician will do the job for the moment. 
Meanwhile, Tehran’s diplomatic offensive in the neighbouring GCC capitals will pose headaches for the US. Tehran is signalling that stability is of common interest to Iran and to the GCC alike, they should hang together and it is advisable not to upset the apple cart. These home truths will fall on receptive ears in the GCC capitals. There is no enthusiasm for war in the GCC. 
Besides, Tehran would know that there are sharply divergent opinions within the House of Saud regarding the situation around Iran, and that the western speculations about Saudi Arabia making up for the Iranian oil remain what they are — based on assumptions regarding the west’s capacity to exploit the infirmities of the Saudi leadership. Yet, no one can precisely foretell what all can happen in the downstream of a chain reaction ensuing from a US-Iran confrontation. Even a most compulsively optimistic western sketch had to end with the frank admission that Saudi Arabia’s own priority would ultimately be to “ring fence” supplies for its domestic use through internal pipelines that bypass the Strait of Hormuz rather than to address the travails of energy security affecting the European economies that are passing through bad times.

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