EU states still divided over details of Iran oil

Reuters News
Posted: Jan 19, 2012 2:59 PM
EU states still divided over details of Iran oil

By Justyna Pawlak and Julien Toyer

BRUSSELS (Reuters) - European Union envoys failed to agree details of a planned embargo on Iranian crude on Thursday, but diplomats said governments still sought to finalize the ban at a meeting of EU foreign ministers on Monday.

The bloc's 27 countries have agreed in principle in recent weeks to ban oil imports from Iran in order to put more pressure on Tehran over its nuclear program.

But they remain divided over several issues, primarily the length of a planned grace period that would allow states heavily dependent on Iranian oil to fulfill existing contracts for a period after the ban went into place.

At a meeting on Thursday, senior EU diplomats had been expected to agree to a plan allowing for a grace period until the end of June.

Under this compromise proposal, EU governments would be prohibited from making new contracts with Iran from the time the embargo was imposed, but could purchase crude previously contracted. This exemption would end on July 1.

"No agreement was reached today but we are confident it will be reached on Monday. Not everybody agreed to the compromise," one EU diplomat said.

Speaking on condition of anonymity, the diplomat said some EU states continued to push for a shorter grace period while others wanted more time to secure alternative supplies of crude.

Tehran denies wanting bombs, as the West alleges, saying it is refining uranium only for electricity generation and medical applications.

EU governments are divided between the desire to ratchet up pressure on Tehran quickly and economic considerations. States such as Greece are concerned about financial costs at a time when Europe is struggling with a two-year debt crisis.

Athens depends heavily on Iranian supplies because Tehran has been offering it preferential credit terms for its crude.

But others say a grace period would significantly blunt the impact of sanctions, because some 80 percent of EU purchases are covered by long-term contracts.

The EU embargo follows stringent new U.S. sanctions signed into law by President Barack Obama on New Year's Eve, which are being gradually implemented but if fully enforced would make it impossible for most countries to pay for Iranian oil.

The unprecedented effort to take Iran's 2.6 million barrels of oil per day off international markets has kept global prices higher and helped cause a sharp fall in Iran's rial currency and a surge in the cost of basic goods for Iranians.

EU diplomats said more discussions will be held in Brussels in coming days, in time for the foreign ministers of the EU's 27 states to make a formal decision. EU policies such as sanctions require unanimity and have to be finalized by ministers.

Other issues remain outstanding. EU states have yet to agree whether to review the economic costs of the embargo before the grace period expires, to check whether countries like Greece had been able to secure sufficient amount of alternative supplies of crude.