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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Obama Administration Finds Few Asian Takers for Oil Sanctions Against Iran

U.S. President Barack Obama recently signed a law imposing more sanctions on Iran's exports to punish Iran over its civilian nuclear uranium enrichment program, which Tehran insists is completely peaceful and allowable under IAEA regulations, but which Washington and Tel Aviv portray as masking a covert attempt to develop nuclear weapons.
Under the legislation, restrictions have been imposed on Iran's central bank with the objective of stifling Iranian oil exports, and the European Union has also hinted that more economic sanctions will be imposed on Iran, which will include a boycott of Iranian oil. The law bans those dealing with Iran's central bank from operating in the U.S. financial system and since Iran uses its central bank as a main channel of receiving payments for its oil exports, the measure is intended to stop foreign countries from importing from the Islamic nation by effectively forcing them to choose between continued access to U.S. financial markets versus continuing to buy Iranian hydrocarbons.
Iran is OPEC’s second largest producer and is the fourth largest producer of oil and natural gas in the world, pumping roughly 4.5 million barrels per day (bpd), with 80 percent of the government’s revenue being generated by its oil and natural gas exports.
Some of the most trenchant criticism of Washington’s most recent action has come from Moscow, which few people remember is in fact an Asian power. Russia Federation Deputy Foreign Minister Gennadi Gatilov bluntly noted during an interview, "We take the position that, in view of earlier resolutions of the UN Security Council that put restrictions on military cooperation with that country, UN Security Council sanctions have completely exhausted their potential as a way of putting pressure on Iran. Recently there has been an obvious trend for the situation surrounding the issue of Iran to exacerbate. The unilateral sanctions of Western states, which go beyond the limits of decisions of the UN Security Council, are exercising a negative effect on the Iranian population and economy. This line undermines the efforts of the international community to solve the Iranian nuclear problem. Whatever may be proposed for approval by the Security Council and goes outside the framework set by those resolutions will have nothing to do with the objective of strengthening the regime of nuclear nonproliferation."
On 12 January Russian Federation Deputy Foreign Minister Sergei Ryabkov called on Iran and other concerned parties to resolve the Iran nuclear issue through dialogue.
Russian Federation Security Council secretary Nikolai Patrushev went further in his criticism of U.S. policy towards Iran, observing, “Unfortunately, the tension surrounding Iran is not diminishing. At this moment the United States considers Iran its main problem. It is trying to convert Tehran from an enemy into a loyal partner, and to do that to use any means to replace the regime ruling there. Both the economic blockade and massive aid to the opposition forces that might carry out a ‘color revolution’ are being used. There exists the likelihood of a military escalation of the conflict, which Israel is encouraging the Americans towards. In the meantime, Russia, China, India, and numerous other countries are making great efforts to resolve the problem by only peaceful means using negotiations. The results of these efforts are at this point negligible, since both the American and the Iranian side have little interest in achieving it now, although for different reasons.”
And China, Iran’s largest importer?
Washington’s new diplomatic initiative has fallen on deaf ears, with Chinese Deputy Foreign Minister Cui Tiankai remarking pointedly, "The normal trade relations and energy cooperation between China and Iran have nothing to do with the nuclear issue We should not mix issues with different natures, and China's legitimate concerns and demands should be respected. We believe the normal economic ties between countries in the world and Iran should not be affected." Cui’s remarks are apparently intended to serve notice to U.S. Treasury Secretary Timothy Geithner, about to visit Beijing, that Washington’s proposed restrictions are a sanction too far.
South Korea?
On 13 January South Korean Presidential spokesman Park Jeong-ha denied a newspaper report that Seoul is expected to slash up to half of its crude imports from Iran, which currently account for about 10 percent of total South Korean crude imports, telling reporters, "No decision has been made by our government with regard to sanctions on Iran. A decision will be made in a direction that minimizes the impact to our economy." Robert Einhorn, the State Department's special adviser overseeing sanctions on Iran, is scheduled to visit Seoul next week to pile on the pressure.
But Japan has caved in.
On 12 January while visiting Tokyo Geithner received a partial commitment from Japan’s Finance Minister Jun Azumi, who after noting that Iranian crude makes up 10 percent of Japan's overall oil imports told journalists after meeting Geithner, "We would like to take action concretely to further reduce (Iranian oil imports) in a planned manner" before adding, "On the other hand, we need some time in non-crude oil related areas, so I asked the Secretary to take Japan's situation into consideration." Geithner was prompt in praising Japan, which he calls a "vital security and economic ally" for standing with Washington and the international community to support a "very important strategic objective."
So, where does that leave Washington’s pressure on Iran? As a rough rule of thumb, the farther east one goes from Tehran, the greater the energy import needs, and Washington’s view of the world contrasts with national energy and security objectives.
Accordingly, the U.S. government has yet to make a convincing case in East Asia that Iran’s nuclear activities threaten their security and economies more than a cessation of oil imports would.

By. John C.K. Daly of Oilprice.com

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