February 27, 2012

This Weekend’s News: Is Iran Intentionally Breeding Uncertainty in the Global Oil Market?

Iran may be attempting to breed uncertainty in the global
oil market in an effort to drive up prices and insulate itself from tightening economic
sanctions, including those against
Iran’s Central Bank

On Sunday, Iran’s semi-official Fars news agency apparently reported
that Tehran suspended a 500,000 barrel oil shipment to Greece. Reuters reported the story, citing that Iran’s
Fars new agency stated, “Oil
tankers that had come to transfer 500,000 barrels of Iranian oil to a refinery
in Greece had to go back empty-handed after Iran refused to give the
” However, as Reuters reported,
Fars did not give a source for its report, and a statement from the Greek
refiner Hellenic Petroleum, which was reportedly the intended recipient of the
oil shipment, denied that Iran had suspended any oil delivery. “That
has nothing to do with us ... all supplies from Iran have been processed
,” a refinery spokesperson told Reuters.    

The report follows a string of recent incidents that should
raise concerns that Iran may be attempting to sow uncertainty into the global
oil market in an effort to rebuff attempts to coerce Tehran to suspend its suspected
nuclear weapons program. Last week, Iran made headlines after suspending oil
shipments to Great Britain and France, which analysts
say contributed in part to the highest oil prices in nine months
. Yet, as
reports noted, Iran’s suspension of oil shipments to Great Britain and France
would have little effect on supply because Britain
had not imported oil from Iran in six months and France only imports
approximately 3 percent of its oil from the Islamic republic
. Nevertheless,
oil prices increased, in part as a “reflection
of concerns about the further escalation in tensions between Iran and the West
says one commodities expert, adding that "Banning
the tiny quantities of exports to the U.K. and France involves very little risk
for Iran – indeed quite the opposite, it catches the headlines and leads to a
higher global oil price, which is something Iran is very keen to encourage

In recent months, statements from Iranian military officials
have also increased concerns that Tehran may attempt to close the Strait of
Hormuz, an international waterway through which 20 percent of the world’s oil
transits. These statements have also taken
a toll on global oil prices, causing anxiety among oil traders and countries to
consider hording oil as tensions between Iran and the West worsen

Iran benefits from seeding anxiety within the global oil
market. The higher the price of oil soars, the more the regime can rebuff
attempts by the West to use economic sanctions to coerce Tehran to suspend its
suspected nuclear weapons program. The report from Reuters on Sunday can be taken in that light: that Tehran is betting
that even a false report about refusing an oil delivery to European recipients
could contribute to higher oil prices. And there is evidence that is
happening. The Washington Post
reported this
morning that oil prices are just below $109 a barrel, the highest since last May
Many geopolitical events go into shaping the price of oil. Iran’s attempt to
meddle in the global oil market by breeding anxiety is certainly one of them; how
effective its efforts are is not initially clear.

Is Iran making a bad bet that it’s meddling will buy it
time? U.S. sanctions, I’m told, are much different this time around, in part
because of the sanctions against Iranian oil coupled with
the Obama administration’s efforts to crack down on Iran’s financial sector,
including the Central Bank of Iran
. How much do the new forms of sanctions
matter? We’ll have to wait and see how this plays out.

This Week’s Events

This morning at 10 AM, head to the Wilson Center for Emerging
Scarcity in a Land of Plenty: Water and Water Policy in Canada

On Wednesday at 10 AM, the Wilson Center will also host an
event on Webs
of Conflict and Pathways to Peace in the Horn of Africa: A New Approach?

Stay around for a noon event at the Wilson Center on Hotspots:
Population Growth in Areas of High Biodiversity
. At 12:30 PM, the GWU’s
Elliot School will explore China's
International Energy Strategies: Global and Regional Implications

On Friday at 3PM, for those interested in the budget, head
to the Environmental and Energy Study Institute for Energy Efficiency and Renewable Energy
Budget for FY 2013
. Finally, at 7 PM, head to American University for United States Maritime
Security: Malacca Straits Piracy and South China Sea Issues