By Trisha Chowdhury
Iran’s controversial nuclear program has landed it in trouble with the European Union. This has resulted in a ban on Iranian oil imports in an attempt to get the nation’s officials into resuming talks. The 27 of the European Union’s foreign ministers located in Brussels have approved of the actions and sanctioned the ban.
The nation’s foreign revenue depends heavily on oil. About 80% of the income generated through foreign revenue it is reliant on the oil industry In addition to the ban, the assets of the nation, that were a part of a sanction, have also been frozen to increase the financial pressure. Other sectors that have been targeted by the European Union are petrochemicals, gas and gold.
Iran’s nuclear program is considered a threat by many nations across the world including global organisations like the United Nations. The European Union is attempting to curb the rampant purchase of nuclear weapons by cutting down finances. Thus, this disables Iranian officials from carrying on with their plans instead of resuming talks.
Iran insists that the nuclear program is a peaceful one and that it wants to be protected from any outside threat. Though the initial threat was expected from its neighbour Israel, a nation it is in loggerheads with, the actual threat it faces at the present is over the Strait of Hormuz, which is considered a very traditional shipping route. Chances of a war breaking out eventually are not being wholly discarded and Iran feels the need to be prepared with warships from Britain and the United States positioned tactically in the Gulf.
The European Union is using a two-fold tactic to pressurize Iran. It is trying to convey the message that it holds the financial capabilities to curb Iran’s nuclear program, yet it is keen to discuss issues by peaceful means.
Though little can be predicted on how much Iran will be affected by the ban, one fact remains that some member states of the European Union will be hard hit by this decision. Greece, Italy and Spain depend highly on the cheap oil imports of Iran. A ban would escalate crude prices over the world and would come as a blow to the economy of these nations that are already grappling with the recent debt crisis. However, the European Union has ensured that for the benefit of these nations, the ban would mean that no new contracts will be undertaken but the existing contracts would be allowed till July. More is trying to be done to help the nations that might be in, especially Greece, but much of that remains unclear at the moment.
Apart from Europe, a large proportion of Iran’s oil buyers are present in Asia. China, India and Japan are some nations that Iran trades with in terms of oil. China purchasing the most of the others, its position is being carefully monitored. However, no clear sign is been given by the Chinese authorities and their stance of increasing trade with other countries in the Gulf without warning Iran any further is rather ambiguous. The United States of America is one of the nations that has endorsed the ban but no definitive action has yet been taken in terms of oil or freezing financial assets or the central bank, which seemed rather passive to many.
Meanwhile, Saudi Arabia has emerged as a prospective nation for oil trade as an alternative. It has agreed to up its oil supply in order to keep the oil prices normal. The reason behind this is that an increase in the oil price would dishevel many financially distressed nations and would increase profits for Iran while exporting to other countries.
Talks with Iran are at a standstill even now and according to Catherine Ashton, the foreign policy chief of the European Union, the last correspondence form her behalf was in October asking for a ‘negotiated solution’, yet there was no response from Iran’s end that resulted in this move. The National Council of Resistance of Iran has welcomed this move.
The European Union’s actions have already sent the global markets into frenzy. How effective the ban really is and whether it punishes the actual offender – Iran – will only be seen with time.