April 22, 2008 / 12:58 PM / 11 years ago

Iran says U.S. pressure could backfire

ROME (Reuters) - U.S. pressure on international oil firms to shun Iran will backfire by hindering efforts to add new supply to meet rising global demand, the Islamic Republic’s oil minister said on Tuesday.

Iran's Oil Minister Gholamhossein Nozari (C, rear) boards an elevator at the International Energy Forum at a hotel in Rome April 22, 2008. REUTERS/Chris Helgren

The United States, in dispute with Iran over its nuclear program, has banned its own nationals from doing business with Iran, OPEC’s second-largest oil producer, and urged foreign companies to follow suit.

“This sort of pressure, which some companies may face, is going to affect the security of supply,” Oil Minister Gholamhossein Nozari told Reuters Television in an interview.

“Those who are engaged in doing the sanctions and limitations should be very concerned what will happen in the next five to 10 years,” he said.

The remarks came on the sidelines of a meeting of oil producing and consuming countries and as oil prices hit a new record high above $118 a barrel, driven in part by traders’ concern about future supply.

U.S. political pressure has delayed progress on gas projects by European companies such as Total and Royal Dutch Shell and led to some European banks pulling their financing for Iranian oil deals.

In addition, U.S. and United Nations sanctions have targeted several big Iranian banks. But Tehran has brushed off any impact on the economy.

“These tactics are the old-style practices. These practices are, in my opinion, very toothless and are not effective these days,” Nozari said.

OIL RALLY

Iran and fellow members of the Organization of the Petroleum Exporting Countries blame factors other than supply for oil’s record run.

Nozari said it was possible the rally would continue, but that in real terms prices were not as high as they seemed because the U.S. dollar is very weak.

“What price we see today is the nominal price of oil. A big part of this price is due to the weakness of the dollar. How it will move depends on the value of the dollar in the future,” he said.

Asked if he expected further dollar weakness to send prices still higher, he said: “Do you have another view?”

“It should be supply and demand that determine the price. But now, when there is a balanced market and there is enough supply to satisfy the demand, there are other factors at play.”

“So if they are not controlled, we can see this situation continuing.”

Record oil prices are boosting revenue for oil exporters. In the Iranian year 2007-08, which ended on March 19, Tehran earned about $70 billion in oil revenue, Nozari said.

Iran has cut all ties with the dollar and receives payment for its crude oil sales in other currencies, a move the oil minister said has been beneficial.

“We have avoided the weakness of the dollar. This shows also the willingness of the countries that are receiving Iranian oil to use their own currency or currencies other than the dollar.”

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