EU Sanctions against Iran: Repercussions and Consequences

EU foreign ministers agreed in Brussels on 23 January 2012 to impose a new round of sanctions against Iran. In fact, the EU has gradually imposed sanctions on Iran since 2007 as part of Western efforts to put pressure on Tehran to halt its nuclear activities. In the past, Europe acted with constraint over sanctions against Iranian oil and gas sector, but now, apparently under U.S. pressures and to project its own problems onto foreign issues, it has directly targeted this sector. The repercussions and consequences of EU sanctions against Iran can be summarized as follows.

The new EU sanctions are aimed at halting Iranian oil imports and its shipment to any destination; blocking all exports of oil-production equipment to Iran and all investments in the Iranian oil industry; freezing the assets belonging to Iran's central bank in Europe; and also prohibiting all trade in diamonds, gold and other precious metals with Iranian state agencies. These sanctions are imposed while the EU is facing one of its worst financial and economic crises. Ironically, those EU countries hit hardest by financial crisis are the biggest importers of Iranian oil within the EU. In 2011, Greece imported 35 percent, Italy 15 percent and Spain 13 percent of their oil consumption from Iran. For this reason, the EU decided that all existing oil-purchasing contracts between Iran and these three European importers of Iranian oil would be honored until 1 July, to reduce the immediate impact of these sanctions. To compensate for the fall of oil supply in the markets, the U.S. and EU have put pressure on Saudi Arabia, Iraq and Libya to increase their oil production to compensate any shortage in oil supply due to Iranian oil embargo.

In reaction to these new sanctions, Iran announced that it will halt its oil exports to France and Britain and also declared that it would cut off its oil exports to other European states including Italy, Spain and Greece, if they would not reach an agreement for long term oil purchasing contracts with Iran. Also, in a reaction to the EU's new sanctions against Iran, Russia has declared its opposition to these new unilateral sanctions imposed on Iran outside the UN framework, calling it a mistaken approach. Iran will not agree to concessions because of pressures. China, Turkey, India, Japan and South Korea, Iran's main trading partners, have declared that they continue to import vast quantities of Iranian oil and have so far resisted American and Western European demands to switch to Saudi or other sources of oil supply. They do not consider Saudi Arabia or Libya reliable sources having enough oil products to meet all their energy needs.

Generally, Iran and the EU have many common grounds for cooperation. Their cooperation in economic areas has been more salient. The EU has remained an important trade partner of Iran. Ninety percent of EU imports from Iran are either oil or oil-related products. In 2010, the EU imported 14.5 billion Euros worth of goods from Iran while exporting 11.3 billion Euros of goods to Iran. The EU policy to sanction Iranian oil and gas sector as well as its central bank would deprive Europeans of Iran's vast and profitable markets and would dash any hope for them to invest in Iran's lucrative projects in the future. Clearly, when they do not buy oil from Iran, they also cannot sell anything to Iran.  On the other hand, Iran's oil embargo would lead to higher oil prices which are harmful for Europe's crisis- ridden economy. For example, the French newspaper Le Monde wrote recently that Iran's oil embargo would increase France's trade deficit to more than the current 70 billion Euros, due to rising oil prices given the fact that France consumes annually 82 million tons of oil that should be imported.

It should not be forgotten that so far Iranian people have had a positive attitude towards Europeans as the owners of a great civilization and culture and regarded them as a source of inspiration in different aspects of material life, but now, with the economic pressures imposed on them by these sanctions, there is a risk that Iranians might change their mentality in this regard; something which would make difficult any efforts for confidence-building in the future. The past experience shows that sanctions do not make any change in Iran's determination to pursue its nuclear activities and considering the above factors, Europe will be a big loser in the "sanctions game". Therefore, it would be wise for European leaders to reconsider their current policies with regard to Iran.