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Iran and its oil

Iran and its oil

The US and Europe are getting tough with Iran. But what will stringent new sanctions against a major oil country mean for the industry and the region?

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July 20, 2010 4:34 by



HOW DO THE SANCTIONS AFFECT ENERGY SUPPLIES TO IRAN?

Lawyers say the new sanctions are all a matter of interpretation. Under strict readings of the new rules, Iranian aircraft were denied refuelling in Hamburg, Germany, and BP confirmed it had ended its contract with Iran Air at Hamburg airport.

BP did not give a reason and declined to comment on whether it had ended all contracts with the Iranian flag carrier.

Analysts have said BP would be particularly keen to avoid any further conflict with the United States following its huge oil spill in the US Gulf.

WHO WILL SUPPLY FUEL AND TECHNOLOGY?

Although the fifth largest exporter of oil, Iran does not have enough refining capacity to meet domestic demand and has to import up to 40 percent of its gasoline needs.

Powers friendly towards Iran are expected to continue to sell fuel to it.

Russia last week drew up plans for lasting cooperation on energy and said sanctions would not stand in the way.

However, Russian President Dmitry Medvedev also urged Iran to explain the “military components” of its nuclear program.

Iran’s oil minister Massoud Mirkazemi told Iran’s IRIBnews website in Moscow last week: “The sanctions will have no impact on our energy sector, which is essential for all countries. Our ties with Russia are based on previous commitments and both countries are determined to continue this trend.”

Iran has said it would blacklist foreign companies that avoided doing business with it because of the sanctions.

But analysts said that now Europe, as well as the United States, had got tougher, Russian companies might be more wary of doing any business with Iran as they would not want to jeopardize relations with European trading partners.

“The question is will Russian companies actually want to do business given that they are big actors in the European market,” said Samuel Ciszuk of IHS consultancy.



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