Iran Walks Back Crude Oil Cut-off Threats

Iran’s oil minister said over the weekend that if the country does cut off oil shipments to Europe, the cuts would be directed only at “hostile” nations. The European Union has adopted a July 1st deadline to begin an embargo against Iranian oil unless the Islamic Republic agrees to roll back its nuclear development program.

The minister also said that Iran did not “anticipate any tensions” in the Strait of Hormuz even if the embargo is enforced, according to a report in the Financial Times.

The “hostile” nations of Europe, in Iran’s thinking, are the UK, France, and Germany, not of which imports much Iranian oil. Greece, Italy, and Spain import significant amounts of Iranian oil and the EU’s deadline was pushed out until summer in order to give these countries a chance to negotiate new, non-Iranian supplies. Iran sends about 600,000 barrels/day to the 27 EU countries.

Iran’s recent statement is meant to do two things: warn off Saudi Arabia, which has said that it will make up any reduced shipments that result from an embargo of Iranian oil; and, not least, maintain the flow of US dollars into Iran’s treasury from sales to Europe, which is practically the only region that pays for oil in dollars.

Iran’s threats have added little if anything to the price of a barrel in the past couple of weeks. That could change, though, if no resolution is reached by summer.