Iran cuts oil to Spain ahead of nuclear talks

By Marcus George Updated at 2012-04-10 20:34:28 +0000

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DUBAI (Reuters) - Iran has cut oil exports to Spain and may halt sales to Germany and Italy, Iran's English-language state television reported on Tuesday, in an apparent move to strengthen its position ahead of crucial talks with world powers later this week.

Iran has played a tit-for-tat game over crude shipments since the European Union agreed in January that it would stop all Iranian oil imports as of July. EU states have since scrambled to find alternative supplies before that deadline, with Iran threatening to cut exports before then.

"Tehran has cut oil supply to Spain after stopping crude export to Greece as part of its counter-sanctions," Press TV said, citing unidentified sources, adding that a similar move was being considered for Germany and Italy.

Industry sources say Spain and Greece have already cut imports substantially in anticipation of the embargo and because of increasing difficulties in paying Iran after tough new sanctions were imposed on its banking sector.

The EU had been the second biggest buyer of Iranian oil after China and its embargo is a direct strike on the OPEC member's biggest source of export income.

The sanctions are designed to force Iran to stop some of the atomic work that the EU and the United States suspect is part of a nuclear weapons program, a charge Tehran denies.

Talks between Iran and six world powers aimed at easing the nuclear stand-off are set to resume in Istanbul on Saturday, more than a year after previous negotiations failed.

AHMADINEJAD DEFIANT

In a sign Tehran was pressuring other important EU customers, the semi-official Mehr news agency said the National Iranian Oil Company had been in contact with Italian buyers about signing long-term oil contacts in recent days.

"It has been said that if Italian oil refineries do not agree to sign long-term contracts, oil sales to this European country will be stopped," Mehr reported.

The reports followed confirmation from Iranian Foreign Minister Rostam Qasemi that oil sales to Greece had stopped.

With fresh talks in sight, Iran has said it has no interest in reviving a nuclear fuel swap that formed the basis of a previous deal that was never implemented and, earlier on Tuesday, President Mahmoud Ahmadinejad said Iran could withstand a total embargo on its oil sales for several years.

"We must say to them (the West) that we have that much (money) saved that even if we did not sell oil for two to three years, the country would manage easily," the semi-official Fars news agency quoted him as saying.

But Foreign Ministry spokesman Ramin Mehmanparast, speaking to reporters in Bosnia, took a softer tone and played down reports of a cut in supplies.

"Our country has decided to revise its relations with France and Great Britain when it comes to oil exports," Mehmanparast said when asked about the reported oil export cuts to Spain and plans for Germany and Italy.

"As for other countries, there are still no such decisions," he said.

MODEST STEPS

An EU diplomat in Brussels said hopes for Saturday's talks were modest and at best they would lead to a second meeting, which Tehran wants to hold in the Iraqi capital Baghdad.

"The key objective is to launch a sustained process. We want to make modest steps, if there is a conducive environment for progress, and go for a second meeting," the diplomat said.

"In the past they had not put forward concrete ideas for confidence building measures. We want them to come up with some in order to demonstrate their seriousness."

Successful talks could pave the way for an easing of sanctions and might lift the threat of air strikes by Israel and the United States on Iran's nuclear sites, something many analysts say could further destabilize the region and push up oil prices.

The International Energy Agency, the energy adviser to industrialized nations, has said the sanctions against Iran could reduce its oil exports by as much as 1 million barrels per day, or 40 percent, from the middle of the year.

In addition to the European embargo, Iran faces cuts in orders from its biggest customers in Asia after concerted diplomatic pressure from the United States.

Analysts say such a large dent in revenues would be painful for the Islamic Republic which is experiencing rising inflation, already well above 20 percent, and a devalued currency.

But since the European embargo was announced the price of Brent crude has increased by around $12 a barrel, giving Tehran more flexibility to discount shipments.

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