Russia fears Israel will push the United States into a military conflict with Iran which could retaliate by blocking oil shipments from the Gulf, a confidant of Prime Minister Vladimir Putin said, as EU states are due to agree new sanctions on Iran over its nuclear program at a meeting of EU foreign ministers on Jan. 23.
“There is a likelihood of military escalation of the conflict, towards which Israel is pushing the Americans,” Nikolai Patrushev, who heads the Kremlin’s Security Council, told Interfax news agency.
Patrushev, a former head of the main successor to the Soviet-era KGB, said Tehran could respond by blocking the Strait of Hormuz between Oman and Iran, through which 35 percent of the world’s seaborne traded oil passes.
“It cannot be ruled out that the Iranians will be able to carry out their threat to shut exports of Saudi oil through the Strait of Hormuz if faced with military actions against them,” Patrushev said in an interview published on Thursday.
Tension over Iranian uranium enrichment, which has moved to a mountain bunker better protected from possible air strikes, has raised fears for world oil supplies and even of war.
Iran says its nuclear program is peaceful while Western powers believe it has military aims. Israel, which sees an Iranian atom bomb as a threat to its existence, is willing to attack Iranian nuclear sites with or without U.S. backing.
However, Patrushev said there was still no proof that Iran was on the brink of creating nuclear weapons.
“Talk about Iran creating an atomic bomb by next week we have heard for many years,” he said, adding that the United States was trying to topple the Iran’s leadership using “all available means” to make the country into “a loyal partner.”
Russia, the world’s biggest energy producer, opposes further U.N. Security Council sanctions over Tehran’s nuclear program and has sharply criticized U.S. and European Union sanctions.
The United States has said it would use force if Iran carried out its threat to block the strait and moved a new aircraft carrier strike group to the Arabian Sea this week.
EU moves towards Iran oil embargo
Meanwhile, EU states drawing up details of an oil embargo on Iran have given wide backing to a proposal to allow European entities to continue to receive repayments in oil for debts they are currently owed by Iranian firms, EU diplomats said.
The 27 states are also working towards a phased implementation of a ban on imports of oil and petrochemical products from Iran. One diplomat said a consensus was emerging that the oil import ban should come into force after six months and the petrochemical product ban after three -- similar to provisions in U.S. legislation.
EU states are due to agree new sanctions on Iran over its nuclear program at a meeting of EU foreign ministers on Jan. 23. They have already agreed in principle to ban imports of Iranian oil, but details on how and when this will be implemented still have to be finalized.
Greece, Italy and Spain, three of the weakest EU economies, depend heavily on Iranian crude. They have been pushing for long “grace periods” to fulfill existing contracts to allow them to find other suppliers before implementing an embargo and reduce any shocks to their already troubled economies.
EU diplomats said the EU’s External Action Service -- equivalent to the bloc’s foreign ministry -- had proposed a continuation of the practice of receiving oil from Iran to repay existing debts, and there was broad support for this.
“Some Iranian companies have outstanding debts in Europe and they reimburse their debt, not with currency but in oil,” an EU diplomat said. “It is suggested that this debt could continue to be reimbursed in oil. We are talking about existing debt -- no new debt can be accumulated.”
The diplomat said the argument made was that if such reimbursements were not allowed, not only would EU entities not be able to recover their money, Iran would have more oil more available to sell to boost government revenues.
“So it would be counterproductive not to allow the reimbursement of this debt,” the diplomat said.
Another diplomat said the idea was based on a proposal by Italy. “It is now quite widely backed,” he said.
“Because it is such a repayment, it’s not a problem. It’s not scandalous because it achieves what we want to, which is to dry up Iran’s resources. Now work needs to be done on the details.”
Gradual application of embargo
Another diplomat said the EU was likely to agree to review points on the oil import ban prior to implementation -- after three months and perhaps six to ensure the benefits in terms of maintaining pressure on Iran outweighed any impact on the EU or the wider oil market.
Speaking to Reuters in Rome, Italian Foreign Minister Giulio Terzi declined to comment on how long a grace period there should be on an embargo, but said Italy was not holding back the issue.
“We are in favor of a gradual application of the embargo but even so we are aiming for quite a rapid introduction,” he said.
Iran has been paying back Italian oil and gas group Eni for decade-old deals with oil for years and Eni CEO Paolo Scaroni has said Eni is still owed nearly $2 billion.
The EU is also planning new sanctions on Iran’s financial sector but states have been divided over whether to include Iran’s central bank in these sanctions. Diplomats said France and Britain backed this but Germany opposed the idea.
The diplomat said negotiations to finalize the sanctions are expected to continue until next week.
EU measures against Iran’s oil industry will complement U.S. sanctions announced on Dec. 31 that aim to make it impossible for most countries’ refineries to buy Iranian crude.
Iran is OPEC’s second largest oil producer after Saudi Arabia, producing around 3.5 million barrels per day.
EU countries buy nearly 600,000 barrels per day (bpd) of Iran’s 2.6 million bpd in exports, making the bloc the largest market for Iranian crude, rivaling China.
The three biggest EU importers have serious debt problems. Greece imports a quarter of its oil from Iran, Italy about 13 percent and Spain nearly 10 percent.