The toughest ever EU sanctions against Iran come into force today, drastically reducing the Iranian Government’s market for oil exports and constraining its ability to fund illegal proliferation activities.
This is the latest diplomatic effort by the international community to intensify the pressure on the Iranian Government to negotiate seriously about its nuclear programme. The US introduced similar tough sanctions on Iran on 28 June.
With recent talks between Iran and negotiating powers in Moscow making little progress, the 27 member states of the EU last week agreed unanimously to bring in the oil ban without further delay.
The restrictive sanctions are targeted at Iran’s nuclear programme, the people who run it and the money that funds it. Everyday goods such as food and medicines are excluded from sanctions to make sure that measures don’t target the Iranian people.
The sanctions include:
• an oil ban of Iranian crude oil starting on 1 July;
• a ban on the provision of financial services related to the sale, purchase and transport of Iranian oil, including Protection and Indemnity insurance (P&I);
The EU has traditionally been a major importer of Iranian oil. In 2011, the EU accounted for approximately 23 per cent of Iran’s oil exports, or at least 585,000 barrels per day (source: IEA data). The phased introduction of the ban has given Member States adequate time to prepare, and for alternative oil suppliers to act to keep the market supplied. The embargo was agreed in January and the EU adopted the legal framework for it (EU Regulation 267/2012) in March. Member States are now ready to stop buying Iranian oil.
EU partners have been working closely with consumer and producer countries around the world to ensure that there is no shortage of oil to global markets and that other Iranian oil importers do not undermine the impact of the embargo. With the US, we are encouraging other non-EU countries who haven’t already done so to reduce or stop oil imports from Iran.
The embargo and US National Defence Authorisation Act (NDAA) sanctions have caused Iranian oil exports to drop by around 1 million barrels per day, which in real terms means almost $8 billion in lost revenues every quarter.
Commenting today the Foreign Secretary William Hague said:
“Today unprecedented oil sanctions on Iran have come into force. These are the toughest measures the EU has adopted against Iran to date. They signal our clear determination to intensify the peaceful diplomatic pressure on the Iranian government.
“We are seeking a diplomatic, negotiated settlement with Iran. We call on Iran to take concrete action to address international concerns about its nuclear programme. It is in the power of the Iranian leadership to end Iran’s current isolation, but unless they change course the pressure will only increase.
“Over the course of the next few weeks Iran faces a choice: it can continue to obfuscate and avoid the critical issues, incurring tough sanctions and increasing international isolation. Or it can begin to cooperate seriously by discussing the steps it is prepared to take on its nuclear programme, and seizing the opportunity to secure a more prosperous and peaceful future for the Iranian people.
“We urge the Iranian government to reflect seriously on its position and return to the negotiating table ready and willing to make diplomacy work.”
Sanctions against Iran are already having a significant impact on the Iranian economy. The free market exchange rate has weakened and - though publicly the authorities remain in denial - inflation is widely reported to have picked up very sharply in recent months. Sanctions are also impacting the Government’s ability to move money and material in pursuit of proliferation sensitive activities. Iran is having difficulty finding buyers for its oil - with media reports that up to 14 Iranian oil tankers, capable of carrying 2 million barrels, are sitting stationary in the Persian Gulf.
In addition to the EU embargo, 10 other countries have reduced their imports of Iranian oil. Recent figures suggest that:
• By 1 July, Iran’s oil exports are set to have reduced by up to 1 million barrels per day (40 per cent) from average 2011 levels (source: IEA June report);
• China, India, Japan, South Korea, South Africa, Turkey, Taiwan, Sri Lanka, Singapore and Malaysia have already reduced Iranian oil imports significantly;
• South Korea, a major importer who last year imported 87 million barrels of Iranian oil (source: IEA data), has said it will stop importing Iranian oil from 1 July;
• China imported 556,000 bpd in 2011 (source: IEA data).