EU moves towards agreement on details of Iran oil embargo

BRUSSELS Thu Jan 12, 2012 11:39am EST

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BRUSSELS (Reuters) - EU states drawing up details of an oil embargo on Iran have given wide backing to a proposal to allow European entities to continue to receive repayments in oil for debts they are currently owed by Iranian firms, EU diplomats said.

The 27 states are also working towards a phased implementation of a ban on imports of oil and petrochemical products from Iran.

One diplomat said a consensus was emerging that the oil import ban should come into force after six months and the petrochemical product ban after three -- similar to provisions in U.S. legislation -- but other another stressed more discussion was needed before this issue was finalized.

EU states are due to agree new sanctions on Iran over its nuclear program at a meeting of EU foreign ministers on January 23. They have already agreed in principle to ban imports of Iranian oil, but details on how and when this will be implemented still have to be finalized.

Greece, Italy and Spain, three of the weakest EU economies,

depend heavily on Iranian crude. They have been pushing for long "grace periods" to fulfill existing contracts to allow them to find other suppliers before implementing an embargo and reduce any shocks to their already troubled economies.

EU diplomats said the EU's External Action Service -- equivalent to the bloc's foreign ministry -- had proposed a continuation of the practice of receiving oil from Iran to repay existing debts, and there was broad support for this.

"Some Iranian companies have outstanding debts in Europe and they reimburse their debt, not with currency but in oil," an EU diplomat said. "It is suggested that this debt could continue to be reimbursed in oil. We are talking about existing debt -- no new debt can be accumulated."

The diplomat said the argument made was that if such reimbursements were not allowed, not only would EU entities not be able to recover their money, Iran would have more oil more available to sell to boost government revenues.

"So it would be counterproductive not to allow the reimbursement of this debt," the diplomat said.

"WIDELY BACKED"

Another diplomat said the idea was based on a proposal by Italy. "It is now quite widely backed," he said.

"Because it is such a repayment, it's not a problem. It's not scandalous because it achieves what we want to, which is to dry up Iran's resources. Now work needs to be done on the details."

Another diplomat said the EU was likely to agree to review points on the oil import ban prior to implementation -- after three months and perhaps six to ensure the benefits in terms of maintaining pressure on Iran outweighed any impact on the EU or the wider oil market.

Speaking to Reuters in Rome, Italian Foreign Minister Giulio Terzi declined to comment on how long a grace period there should be on an embargo, but said Italy was not holding back the issue.

"We are in favour of a gradual application of the embargo but even so we are aiming for quite a rapid introduction," he said.

Iran has been paying back Italian oil and gas group Eni for decade-old deals with oil for years and Eni CEO Paolo Scaroni has said Eni is still owed nearly $2 billion.

The EU is also planning new sanctions on Iran's financial sector but states have been divided over including Iran's central bank in these sanctions.

Diplomats said Germany had opposed the idea, but a German diplomat denied this, saying: "Germany is actively taking part in the discussion on action against the Iranian central bank."

One diplomat said discussions were focused on finding a formula that would stop short of a full ban on dealing with the central bank but nevertheless be effective in drying up funds to Iran's nuclear program.

Diplomats said negotiations to finalize the sanctions are expected to continue until next week.

EU measures against Iran's oil industry will complement U.S. sanctions announced on December 31 that aim to make it impossible for most countries' refineries to buy Iranian crude.

Iran is OPEC's second largest oil producer after Saudi Arabia, producing around 3.5 million barrels per day.

EU countries buy nearly 600,000 barrels per day (bpd) of Iran's 2.6 million bpd in exports, making the bloc the largest market for Iranian crude, rivaling China.

The three biggest EU importers have serious debt problems. Greece imports a quarter of its oil from Iran, Italy about 13 percent and Spain nearly 10 percent.

(Additional reporting by Adrian Croft in London and Roberto Landucci in Rome)

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Comments (1)
mz219 wrote:
The fear that Iran may have or use a nuclear weapon against any nation is a complete distortion of reality and is nothing but black propaganda. The unimaginable use of a nuclear weapon by Iran would assuredly result in the destruction of Iran- an end that even the craziest of the leaders would avoid at all costs.
The Iranian leadership has so far shown incredible tolerance and restrain in the face of the most concerted hostile and pugnacious attacks by the US for over 30 years. Therefore, this is not the kind of leadership that “crazy mad man” label could be attached to.
This situation raises a few interesting and important questions:
• Despite years of in-depth inspections, investigations and continuous audits by IAEA, why isn’t there a single shred of evidence that Iran is developing nuclear weapons?
Could the reasons for vilifying and terrorizing Iran be because Iran has dared to stand up to the US and demand justice, equality and prosperity for the oppressed nations of the world, including the Palestinians?
• Does anyone really believe that the sanctions imposed against Iran have been the result of a free, fair and democratic process at the UN and based on valid evidence?
• Aren’t these sanctions illegal and immoral because they are really aimed at destabilizing a sovereign nation and achieving a regime change due to ideological differences?
• Aren’t the US and its allies guilty of crime against humanity for imposing unjustified sanctions against a weaker nation with the specific aim of suffocating their economy and wreaking untold poverty, death and destruction on that nation?
• Why is it that our international organizations that are charged with defending and upholding human rights, have supported and colluded with the powerful nations to impose unjustified sanctions against Iran? Are these organizations fit for purpose?
• If we, the ordinary people of the world, can see the injustice, inequality and oppression meted out by the powerful governments then why the great thinkers of our time, the free press and the independent journalists of the free world are so silent on these issues? Why do they go along with the black propaganda as if it were the truth? Why aren’t they questioning our leaders and take them to task on their policies and illegal actions? Have they gone deaf and blind or have they been silenced? Why and by whom?

Jan 12, 2012 5:01pm EST  --  Report as abuse
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