All things considered, India acted prudently in preserving its oil imports from Iran. Reports suggest that the European Union [EU] may not, after all, implement in July its oil embargo against Iran. The EU is in two minds. An April deadline to review the impact of the embargo decision (which was taken on January 23) has been postponed on the request of Greece because it is having “difficulty finding alternative suppliers.”
The situation, let us say, is very dynamic. How the Iran talks go in the next round in Baghdad (May 23) will impact the oil market. The EU sanction have caused an 18 percent increase in oil price — although the europeans continue to buy Iranian oil.
The IMF has warned that price may increase by up to 30 percent if Iranian supplies are disrupted. The IMF head Christine Lagarde warned of “sudden and brutal rise in the price of oil… [which] could have serious consequences on the global economy.” Curiously, Iran Oil Show, which is currently under way in Tehran, attracted 40 participants from the West despite all the talk of ‘isolating’ Iran. Iran too is anticipating a big expansion in oil and natural gas production in a near term.
Clearly, everything hinges on the talks between P5+1 and Iran. The signs look good. The Friday Prayer meeting in Tehran is always an indicator of the way the wind is blowing. Ayatollah Ahmad Jannati, a prominent figure int he religious establishment, appeared on the podium on the ‘revolutionary grounds’ of Tehran University this week. He hailed the outcome of the Istanbul round and called on the West to end hostility. He cautioned against the sanctions.
Reuters read meaning into Jannati’s speech as of a strategy by Tehran to prepare the Iranian public for a deal with the West. If it is so, Jannati is not alone. Sensible voices in the West are also making themselves heard articulating the desire for a settlement with Iran. The voice of Javier Solana, who used to be EU’s foreign policy chief, is particularly interesting, since he has extensively dealt with Iran on the nuclear issue.
Solana is cautiously optimistic. By the way, he discloses: “On the first day of the talks in Istanbul last weekend, [Iran's chief nuclear negotiator Saeed] Jalili accepted a US request for a bilateral meeting within the context of the negotiations, and all participants deemed the results so far to be a step in the right direction.” Wow! Even David Ignatius didn’t know this although he suspected there could be a deal in the works between Washington and Tehran.
– April 21, 2012