European Union Ministers Put Iran Oil Imports Ban Into Effect

European Union foreign ministers have officially adopted an oil embargo against Iran as a result of its nuclear program. These sanctions place an immediate ban on all new oil contracts with the country. Any existing contracts will be honored until July 1, 2012. Tehran vehemently denies any nuclear weapon development, and says that talks are more effective than sanctions in resolving this situation.

The EU currently buys about 20% of Iran’s oil exports. The Pentagon reports that aircraft carrier, USS Abraham Lincoln, as well as a French warship and a British Royal Navy frigate, have passed through the Straits of Hormuz without any altercations in the wake of Iranian threats to block the trade route.

Aside from stopping any new contracts and phasing out existing contracts with Iran, the new embargo will have other impacts throughout the world. China, Japan, India, Italy, South Korea, and other countries all import oil from Iran. Additionally, restrictions on Iran’s central bank are expected to be agreed upon by EU ministers.

According to BBC, this is one of the most influential and strictest steps the EU has ever taken. Iranian officials have been quoted saying that Tehran should stop all oil sales immediately, disregard the July 1st deadline, and watch as oil prices soar. As other countries, including Russia, believe that talks amongst the international powers of the world need to resume in solving these issues; EU officials state that they have not received a reply from Iran from an offer sent back in October 2011.

As tensions continue to rise, many are realizing that oil is Iran’s most valuable asset and the lucrative export helps to sustain its government in money and power. A cease in these sales may damage the economy, but in itself will not destroy it fully, according to BBC representatives. Asian countries are in the midst of being persuaded to reduce oil purchases from Iran.

Iran has threatened to retaliate over these implied sanctions by blocking the Strait of Hormuz, at the entrance to the Gulf, where 20% of the world’s oil exports pass through. The United States has said it will keep the trade route open, which has the possibility of a confrontation between countries. Oil prices have already seen a slight rise based on the increasing tension and expected impact of the EU ban on oil.