This is an article from the Financial Times dated January 26, 2012. I highly recommend that you sign up with them for future information.
Iran threatens to act first on EU embargo
By Najmeh Bozorgmehr in Tehran and Javier Blas in London
Iran has threatened to pre-empt a European embargo on its oil by halting its exports to the region immediately, a move that could hit economically weak southern European countries.
The European Union this week approved a ban on crude oil imports from Iran from July 1, a five-month delay designed to give Greece, Spain and Italy time to find alternative supplies. Athens buys about a third of all its oil supplies from Iran.
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Officials in Madrid, Athens and Rome have said they would use the delay to ask other oil producers, including Saudi Arabia, Russia and Iraq, for additional supplies.
Emad Hosseini, spokesman for the Iranian parliament’s energy committee, said lawmakers in Tehran were finalising a draft bill to stop all oil trade with Europe.
“If the plan is approved, the government will be obliged to stop its oil sales to Europe before the EU begins its oil embargo against Iran,” Mr Hosseini told the semi-official Mehr news agency. He said the bill could come before parliament on Sunday.
Several other prominent Iranian lawmakers have made similar proposals and the Kayhan newspaper – whose editor is appointed by Iran’s supreme leader Ayatollah Ali Khamenei – published an editorial on Wednesday urging parliament to pre-empt the embargo.
“Why should we not stop oil exports to European states immediately and replace them with other numerous customers who are ready to buy [Iran’s oil],” the editorial read.
Last year, the EU bought an average of 600,000 barrels per day of Iranian oil, about a quarter of the Middle East’s total oil exports. China is Iran’s biggest oil customer, accounting for about 500,000 b/d.
Oil analysts had warned that Iran could react to a European ban with its own embargo, pushing oil prices higher.
Lawrence Eagles, head of oil research at JPMorgan in New York, wrote in a note to clients last month that “the closer more stringent oil market sanctions come to reality, the greater the potential for Iran to become the first mover”. Mr Eagles, a former senior official at the International Energy Agency, warned: “If Iran halted exports to key countries, pre-empting the imposition of tighter sanctions, a supply loss could come quicker than the market expects and would … elevate associated concern”.
Oil prices rose on Wednesday, but several factors – including the meeting of the US Federal Reserve – impacted the energy market. Brent crude, the benchmark, reached a session high of $110.89 a barrel, but later pared gains to trade five cents higher at $110.08 a barrel.
The effectiveness of Tehran’s pre-emptive move is unclear. Total of France, which last year bought an average of 80,000 b/d of Iranian crude, said it was not longer buying oil from the country. “We have already stopped,” Christophe de Margerie, chief executive, said.
Tehran has threatened in recent weeks to shut down the Strait of Hormuz, a chokepoint through which a third of all oil traded by tanker passes, but has taken no action.