Greece Said to Seek Oil-Supply Assurances Under Potential Embargo of Iran

Greece is seeking assurances that a potential European Union embargo on oil imports from Iran won’t push the Greek economy over the brink by forcing it to seek higher-cost oil elsewhere, said a European diplomat with knowledge of the matter.

Greece, which bought 14 percent of its imported oil from Iran in the first half of 2011, wants the EU to ensure that any new oil contracts would include terms similar to those in its existing agreements with Iran, which doesn’t require financial guarantees, the diplomat said on the condition of anonymity because the talks are private.

EU foreign ministers will discuss additional sanctions on Iran over its nuclear program at a Jan. 23 meeting in Brussels. They may reach a political decision to impose an oil embargo, with further work to alleviate Greece’s concerns in the weeks that follow, the diplomat said.

The EU adheres to United Nations’ sanctions against Iran and has applied additional restrictions of its own. The bloc has already banned financing for and investment in the oil and gas industries as well the export to Iran of related equipment and technology.

Crude oil for February delivery slid 0.7 percent to $99.68 a barrel at 8:51 a.m. on the New York Mercantile Exchange.

Oil Stockpiles

Iranian officials have threatened to close the Strait of Hormuz, through which almost 20 percent of globally traded oil flows, in the event of military strikes or a blockade of shipments over its nuclear program.

The International Energy Agency yesterday said it sees no urgency to release oil stockpiles in response to Iranian threats to oil shipping, according to Fatih Birol, the group’s chief economist.

The EU is in contact with oil-producing countries, which have declared they’re prepared to act to stabilize the market if necessary, the EU diplomat said.

Iran, the second-largest oil producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, says its nuclear program is for civilian purposes only. The U.S., EU and Israel suspect the program is a cover for the development of weapons capabilities.

‘War and Chaos’

Israeli leaders held talks today with the top U.S. military commander, General Martin Dempsey, who arrived after the postponement of a joint exercise that was to be the biggest ever for the two allies. Defense Secretary Leon Panetta and other U.S. officials have warned Israel not to strike Iran’s nuclear facilities, which might trigger retaliatory attacks as well as a naval confrontation in the Strait of Hormuz.

In a speech to foreign diplomats to Paris today, French President Nicolas Sarkozy said stronger sanctions were needed to stop Iran’s nuclear program and prevent military action against the Islamic Republic, which would “unleash war and chaos” instead of solving the problem.

“There is only one solution: it’s a series of much harsher sanctions, much more decisive, that include an oil-import ban by all and the freeze of central bank assets,” he said.

A meeting of EU diplomats yesterday in Brussels left it to foreign ministers to determine the timing of the oil ban, which would include an exemption for existing contracts to enable countries such as Greece, Italy and Spain to find alternative supplies. The three countries accounted for about 68 percent of EU imports from Iran in 2010, European Commission data show.

Compromise

Most governments back a Danish proposal for the start of a full embargo on July 1, which could be a compromise between nations led by France, which have been urging the shortest delay, and countries most reliant on imports from Iran that originally pressed for an exemption of as long as 12 months, another EU diplomat said.

Greece stuck to its demand of an eight-month delay at yesterday’s meeting, according to a European official informed about the talks, who asked not to be identified. Talks on the ban will continue through the weekend, another EU official said. Any decision to impose an embargo would have to be unanimous.

Greece’s economy is on the ropes as the country holds talks with private creditors on a debt-swap deal that would free up 130 billion euros ($168 billion) of rescue aid.

The parties are near an initial agreement under which old bonds would be swapped for new 30-year securities carrying a coupon that would begin at 3.1 percent, reach 3.9 percent and go as high as 4.75 percent, Athens-based newspaper Proto Thema reported on its website, without saying where it got the information.

source  bloomberg.com