Tehran says EU oil sanctions will only increase crude prices, not affect Iran economy

A European Union decision to impose a ban on Iranian oil will not affect Iran’s economy and will only increase crude prices, Iranian lawmakers and officials said on Monday.

“The imposition of oil sanctions on Iran will only serve some American and European politicians. It will not have any effect on Iran’s economy,” Ali Adyani, a member of parliament’s energy commission, told Fars news agency.

Adyani said Iran would still be able to sell its oil to “any country” despite the ban, and that the implementation of new sanctions would cause a hike in oil prices, Fars reported.

Another member of the commission, Hassan Shabanpour, rejected the European decision as “propaganda,” telling the parliament’s website that Saudi Arabia would not be able to compensate for Iran’s oil exports to Europe.

Meanwhile a former Iranian intelligence minister, Ali Fallahian, told Fars that the best solution to counter the new measures was to stop exporting oil to Europe before the bloc is able to find a replacement for Iranian oil.

“It would disrupt the Europeans’ plans and (efforts) to impose sanctions” on Iranian oil, he said.

By mid-afternoon no Iranian government official had yet reacted to the new sanctions.

The EU on Monday agreed to slap an embargo on Iranian oil exports as the West ramped up pressure on Tehran over its nuclear drive and urged it to return to the negotiating table.

A compromise agreement, due to be formally announced later the same day, provides for an immediate ban on importing Iranian crude and a gradual phase-out of existing contracts between now and July 1, diplomats in Brussels told AFP.

Iran sells about 20 percent of its oil to the EU, in particular to Greece, Italy and Spain.

Russia says sanctions are counterproductive

In response to the EU sanctions, Russia said viewed the oil embargo on Iran as counterproductive and would continue to defend Tehran against further sanctions over its nuclear program.

“Unilateral sanctions do not help matters,” Russian news agencies quoted Foreign Minister Sergei Lavrov as saying in reply to the EU decision.

“We will restrain everyone from making harsh moves. We will seek the resumption of negotiations.”

Lavrov added he was confident that talks between Iran and the Western powers could be resumed soon.

“Moscow believes that there are fairly firm prospects for the resumption of talks in the immediate future,” he said.

“These opportunities exist despite an entire series of recent steps, including those taken by the IAEA director general.”

Russia has been fiercely critical of the United Nations’ nuclear watchdog for issuing a report in November claiming it had “credible” intelligence showing Tehran’s interest in acquiring nuclear weapons.

Lavrov has argued that the report contained nothing new and insisted that any sanctions beyond the four rounds approved already by the U.N. Security Council only threatened to harm the Iranian people.

“Since we have already adopted collective sanctions in the U.N. Security Council, everyone should be keeping to that line, adding nothing and taking nothing away from the common position,” Lavrov said.

In the toughest action yet to reduce Iran’s ability to fund a nuclear weapons program, the EU ministers are also set to target the country’s central bank, ban investment and imports of petrochemicals and the sale of gold, diamonds and other precious metals to Iran.

Together, the measures are intended not only to pressure Iran to agree to talks but also to choke of funding for its nuclear activities.

Feeling increasingly encircled, Iran's hardline Islamic clerical elite has lashed back by threatening to block the main Middle East oil shipping route, the strategic Strait of Homuz.

Since the New Year, Tehran also began to enrich uranium in an underground bunker and sentenced an Iranian-American citizen to death
on espionage charges.

With world oil output estimated at some 88 million barrels per day in 2011 and some 17 million of those barrels passed through the Strait.

If economic sanctions sufficiently pressure Iran to retaliate by closing down the Strait, nearly 20 per cent of worldwide oil trade would be impacted, resulting in a massive spike in global energy costs.

The sanctions are also having a real impact on Iran’s domestic economy, causing prices of imported staples to soar and the rial currency to tumble.