Effectiveness of Western sanctions on Iran disputed
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Saudi Gazette - 30 December, 2012
http://gitm.kcorp.net/index.php?id=628321&news_type=Economy&lang=en

A lot is at stake on the global energy chessboard. While Mr. Obama sits down
in Washington to build a new team, his next moves on the Iranian front would
continue to impact the energy world – in one form or the other.

Much indeed depends on the effectiveness of the Western sanctions on
President Ahmadinejad regime. And the answer would have political
ramifications too, especially to what extent the new Obama administration in
Washington would go after Tehran.

The issue of current Iranian output thus remains a big if, in the entire
equation. To sieve truth from wartime propaganda has never been an easy
task – and the current scenario is no different.

In the wake of the punitive oil and banking measures enacted by the US and
Europe, Iran’s oil exports have reportedly fallen by about half in recent
months, some reports claim. Parts of Western media has been suggesting that
the Iranian output was to fall by about 850,000 bpd by the end of this year
to 2.7 million bpd, and fall by another 200,000 bpd in 2013. And that the
drop has contributed to a fall in the country’s currency, plummeting to less
than half its original value.

Iran contradicts this entire scenario. Iran’s oil minister claimed last week
his country has successfully overcome sanctions on the sale of its oil.
Detailing the situation from his perspective, Iranian Oil Minister Rostam
Qassemi underlined that the (Iranian) industry was in “bad shape” about two
months ago because of the oil embargo, “however, with better planning, we
have left the bottleneck behind, almost.” The word “almost” above is
definitely interesting and open to all sorts of interpretations.

Mr. Qassemi claimed that the steps taken in recent months would enable Iran
to export its oil to the “farthest spots” around the world.

Reiterating that the sanctions have been ineffective, Qassemi insists that
Iran “is now producing 4 million barrels of oil every day, adding that the
country’s gas production too has risen to 600 million cubic meters a day.”

In recent weeks, other Iranian officials have also been dismissing the US
sanctions as ineffective, saying that they are finding Asian partners
instead. Several Chinese and other Asian firms are negotiating or signing up
to oil and gas deals, they are insisting.

The new sanctions now in operation target Iran’s energy, shipping and
shipbuilding industries as well as its seaports too. In its efforts to check
the outflow of crude from Iran to global markets, the West has also “revoked
shipping insurance” to crude cargo from Iran. Mr. Qassemi now says that this
issue has been taken care of. Instead, Iran has set up its own insurance for
oil tankers after Western companies refused to cover them, he added.

Spokesman of Iran Majlis Energy Committee Hossein Amiri-Khamkani says Tehran
expects friendly countries not to comply with the US-engineered sanctions
against the Islamic Republic’s energy sector.

“We expect friendly countries not to comply with these sanctions because
Iranians recognize their friends and enemies (when they are) in dire straits
and under pressure,” he said. “Oil buyers and long-time customers of Iran’s
oil need our crude and they have to find a solution for (coping with) these
sanctions,” added Amiri-Khamkani.

China is Iran’s top trade partner and Beijing has publicly criticized the
US-led sanctions against Tehran. South Korea’s import of Iranian crude oil
has also gone up by 2.9 percent in November compared to a month ago despite
Western embargoes.

And in order to overcome the sanctions on its energy sector, Iran is
reportedly planning to spend $ 122 billion in refineries by the end of the
Fifth Five-Year Economic Development Plan (March 2016), Alireza Zeighami,
Iranian deputy oil minister said recently. The needed money will be financed
by foreign and domestic investors, he added. Half of this amount has been
already invested in the sector, he explained.

Zeighami insisted that Iran’s gasoline production capacity will surpass 70
million liters per day by the end of April, 2013, overcoming the shortage of
fuel in Iran and the consequent imports. Iran’s average gasoline consumption
is 64 million liters per day.

And with recent developments in Washington, the political scenario against
Iran could also be in for a change, analysts feel. Former CIA Director David
Petraeus was one of few in Washington ruling elite who has been underlining
that Iran was at war with the US, and no bargain could be struck with
Tehran, analysts emphasize. And could his departure make a difference in
Washington’s approach to the Iranian imbroglio? What happens to US foreign
policy when it loses a man of Petraeus’ experience, perspective, and
institutional memory? Big questions indeed!

According to some former Petraeus aides, leading military officials,
policymakers, and analysts close to the four-star general while talking to
media believed, Petraeus understood, more than anyone else in the US
national-security apparatus that the Islamic Republic was at war with the
United States. By Petraeus’ reckoning, they said, it’s not possible to
strike a grand bargain with Iran over its nuclear weapons program because
the larger problem is the regime itself, whose endgame is to drive the
United States from the region. And no arm of the regime is more dangerous
than its external operations unit, the Qods Force, whose mastermind, Qassem
Suleimani, was considered by Petraeus to be a personal enemy. All this had
serious implications for the energy world.

Meanwhile, with Secretary Leon Panetta, apparently not joining the new US
administration, the issue of a new Defense Secretary is also generating
quite a debate in Washington. And this could have an impact on Iran policy
too.

While Chuck Hagel, the former Nebraska senator and current co-chair of Obama’s
intelligence advisory board, was being vetted for the position, a growing
number of GOP senators have been expressing concerns about his potential
nomination. Hagel’s critics have been mounting a campaign, accusing him of
being weak on Iran.

Hawks seem on retreat in Washington. And all this would carry immense impact
on the energy world. Indeed, not one dull moment on the global energy
chessboard!