LONDON/TEHRAN: Iran has ready alternatives to a threatened European Union embargo on its oil and increased pressure from Washington, and intends to keep up exports of some 2.3 million barrels per day this year, a senior Iranian oil official told Reuters.
European Union governments have reached a preliminary agreement to ban imports of Iranian crude to the European Union but have yet to decide when such an embargo would be put in place, European Union diplomats said Wednesday.
The agreement, news of which sent crude oil prices higher, followed talks in the last days of December between EU envoys, diplomats said.
Objections to the idea, notably from Greece, were dropped during the talks, they said.
?A lot of progress has been made,? one EU diplomat said, speaking on condition of anonymity. ?The principle of an oil embargo is agreed. It is not being debated anymore.?
The U.S. backed the EU decision, saying Iran?s oil revenue could be cut without disrupting global oil supplies, a Treasury official told Reuters on condition of anonymity.
A ban on exporting oil-related technology to Iran and more measures against shipping of crude are also under discussion, diplomats said.
Diplomats said there was still a debate among European capitals over whether to enforce a crude ban immediately after it is agreed or to wait a few months. Some European Union member states are concerned about the economic impact of an embargo at a time when Europe is struggling with massive debt problems.
Greece, in particular, has been hesitant but Greek government sources said Tuesday Athens would not break ranks with its EU partners on the issue.
Tensions between the West and Iran ? the second biggest producer in OPEC ? have already pushed up oil prices.
The price of a barrel of benchmark Brent crude rose more than a dollar Wednesday from its previous close to a session peak of nearly $114, following the news that Europeans had agreed in principle to ban Iranian crude.
Iran supplies a total of around 450,000 barrels per day to EU member states, making the bloc collectively the second largest market for Iranian oil after China.
Tehran had already considered different routes if that were to happen, S. M. Qamsari, International Director of the National Iranian Oil Co., said by telephone from Tehran shortly before the announcement.
?We could very easily replace those customers,? said Qamsari. Some, but not all, of any displaced volume could move into China as well as other Asian countries and Africa, he said. Iran was unlikely just to store crude on tankers as that was only a short-term solution.
He said he expected shipments would remain unchanged this year.
?We?ve got very high demand from our lifters, so we have the same quantity [just above 2.3 million bpd] in our term contracts,? Qamsari said.
Roughly 30 percent, or just under 700,000 bpd, of Iran?s oil steams west of Suez, he said. More than half that volume is shipped to Europe, roughly 200,000 bpd moves into Turkey and the remainder is routed into Africa.
Iran?s central bank intervened Wednesday to prop up the rial that strengthened by around 20 percent against the dollar, Iranian media reported, recovering some of the sharp losses seen after imposition of new U.S. sanctions.
The rial dropped to a record low after U.S. President Barack Obama signed a bill on imposing fresh restrictions on the country?s central bank Saturday.
The sanctions, if fully implemented, could hamper the major oil producer?s ability to sell oil on international markets.
Iranian authorities have played down any link between the weakening exchange rate and the imposition of the U.S. ban, saying necessary measures will be taken to maintain the value of the country?s currency.
?The exchange rate of U.S. dollar, which was around 18,000 rials Tuesday, has dropped to 14,000 Wednesday,? said the Jahan-e Eqtesad daily. The dollar was traded at about 10,500 rials to the U.S. dollar last month.
The head of Iran?s central bank Mahmoud Bahmani said the fluctuation in the foreign exchange market was a ?psychological war,? created by Iran?s enemies, the daily Kayhan reported.
?The central bank is trying to use appealing financial and monitory tools ... to encourage people to save their money in banks,? Bahmani said.
Rising inflation, a reduction in bank interest for savers and concerns over potential military strike by the United States and Israel have all pushed Iranians to seek hard currency as a safe haven for their wealth.
?The central bank has been asked to inject more foreign currency into the market if necessary,? said Industry, Mine and Commerce Minister Mehdi Ghazanfari. He did not elaborate.
Some analysts suggest that the government is making profit out of the soaring price of dollars but the domestic currency?s drop has created concerns among ordinary Iranians.
Staple food prices have increased by up to 40 percent in recent months and many critics have put the blame on increasing isolation caused by President Mahmoud Ahmadinejad?s economic and foreign policies.
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