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Guest Post: Iran Unfazed By Congressional Threats Of New Energy Sanctions

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Submitted by Fawzia Sheihk of www.OilPrice.com

U.S. lawmakers are toughening their stance on Iran’s energy industry with new economic penalties, but experts doubt the Islamic regime will pay much attention and is more likely to open the doors even wider to other players eager to replace fleeing investors.
 
Long on Congress’ radar screen, Iran is being targeted by two bills: The Senate’s Dodd-Shelby Comprehensive Iran Sanctions, Accountability and Divestment Act passed in late January; and the House’s Iran Refined Petroleum Sanctions Act approved in December.
 
The bottom line is these bills, once signed into law by President Obama, will pursue financial institutions and businesses that do business in Iran’s energy sector or help the regime build its refining capacity.
 
To an outsider, the stakes appear high.
 
After all, Iran, an OPEC founding member, holds the world’s third-largest proven oil reserves and the world’s second-largest natural gas reserves, according to the U.S. Energy Information Administration.
 
Not to mention, its pariah status in the world makes luring investment difficult at times.
 
Despite that, the country is not all that concerned about the latest congressional maneuvering, observers charge.
 
“I think these measures are a good thing to do but let’s be honest [that] the impact is going to be not necessarily immediate, and that the first instinct of Iranian leaders will be to ignore it,” said Patrick Clawson, deputy director for research at the Washington Institute for Near East Policy and an Iran expert.
 
Iranian leaders are confident East Asian firms can fill a void left by major Western companies, Clawson told OilPrice.com. Iran is a major producer, but its oil fields are quite old and it has to do an “extraordinary amount” of drilling, he said. This makes the country a “very attractive place for international oil field services companies which are not represented there,” Clawson maintained.
 
Countries like Russia, China, Malaysia and India may potentially step up to the plate, Alex Vatanka, a scholar at the Washington-based Middle East Institute, said. “The Russians and the Chinese are sitting there thinking: ‘Great, Iran can’t deal with the West; the market is ours to be had.’”
 
Venezuela, a long-time U.S. foe, is close allies with Iran too, a Washington source familiar with Iranian issues said on the condition of anonymity. Venezuela has enormous petroleum and refining capacity and is not about to “go along with any embargo,” said the source.
 
The Islamic regime, moreover, believes it can get by without access to Western technology, Clawson noted.
 
But Iran, which draws 80 percent to 85 percent of its income from oil revenue exports, does indeed look to the West for technology and financing, Vatanka argued. Energy issues are seen as strategically important to Iranians, which means U.S. countermeasures will have an impact across the board, he said.
 
While Mahmoud Ahmadinejad’s government may yearn for Western advances to
boost its oil and gas sector, “from a political point of view, they won’t give up their nuclear program just for the sake of energy technology,” Vatanka added. Iran produces just above five million barrels a day and aims to boost that to more than six million barrels, he said.
 
“Their threat perception is totally different,” he noted. “It’s not even looking towards the West.” Rather, he said, the Iranian government is focused on battling a “domestic issue” in the form of the country's rising opposition.
 
In some ways, the United States' unilateral sanctions on gas shipments to Iran would actually be a “lifeline for Ahmadinejad,” asserted Patrick Disney, assistant policy director at the National Iranian American Council in Washington. The government has sought to cut gas subsidies for years, which drain 10 percent to 20 percent of the annual gross domestic product, but a “popular backlash” prevents such a move, Disney explained.
 
“If the U.S. goes after Iran’s gasoline imports, the government will have a free hand to drop these subsidies, blame the United States and free up tens of billions of dollars per year,” he maintained.
 
In this latest round of U.S. sanctions, Western companies probably will walk away unscathed, experts say. That's because they have either not injected a huge amount of capital into the energy sector there or have already pulled out of the country, Vatanka noted.
 
The congressional bills will affect the top suppliers of refined petroleum to Iran, including the Netherlands, United Kingdom, France and Switzerland, a Washington source said.
 
The ultimate impact of the proposed law depends on its enforcement mechanisms, the source told OilPrice.com. As it stands, Obama can “literally preclude [certain Western] corporations from operating in the United States. So every British Petroleum gas station, for example, would be closed in the U.S.”
 
The White House is studying the final language of the bills, and wants “flexibility” to deal with those countries invested in Iran but also working with the United States in non-proliferation efforts regarding Iran, noted the source.
 
In the end, it’s doubtful the president would actually “bring the ax down on British Petroleum in the U.S. like that,” conceded the source.
 
Right now, though, Congress seems to be pushing for radical steps that will shake up Iran once and for all.

Originally published at: http://www.oilprice.com/article-iran-unfazed-by-congressional-threats-of-new-energy-sanctions.html

By Fawzia Sheikh for Oilprice.com who focus on Fossil Fuels, Alternative Energy, Metals, Crude Oil Prices and Geopolitics. To find out more visit their website at: http://www.oilprice.com

 


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Wed, 02/10/2010 - 21:23 | Link to Comment Dark Helmet
Dark Helmet's picture

Uhhh.... won't limiting Iran's access to energy just... uhh... provide a greater incentive to enrich Uranium for nuclear power?

 

Wed, 02/10/2010 - 23:28 | Link to Comment jeff montanye
jeff montanye's picture

sanctions worked so well with cuba, iraq and north korea, they just had to extend them to iran as well.  

Thu, 02/11/2010 - 02:34 | Link to Comment Rick64
Rick64's picture

Our sanctions are another countries opportunity.

Wed, 02/10/2010 - 21:26 | Link to Comment Double down
Double down's picture

It is a pretty smart move in a stupid game. 

Constricting credit is a pretty smart move, there are many IOUs out there. 

Wed, 02/10/2010 - 21:32 | Link to Comment Going Down
Going Down's picture

 

Informed Comment

 

Iran is already producing low enriched uranium for reactor fuel. That it has decided to produce a higher grade of it for its medical infrastructure is neither surprising nor a cause for panic. You'll know if Iran decides to build a bomb. It will throw out the inspectors or refuse them access, including to places the US detects a huge electromagnetic signature but which Iran declines to declare as facilities. None of that has happened. Until then, the world should relax.

 

juancole.com

 

 

 

 

Wed, 02/10/2010 - 22:51 | Link to Comment Missing_Link
Missing_Link's picture

I started writing an angry rebuttal until I realized you were being facetious.  Well played, sir!  A bit subtle, but wekk played nonetheless.

Wed, 02/10/2010 - 21:44 | Link to Comment Anonymous
Wed, 02/10/2010 - 21:47 | Link to Comment buzzsaw99
buzzsaw99's picture

We plan to impose tough sanctions against anyone doing business with Iran unless they happen to be:

Russia

China

Venezuela

JP Morgan

Goldman Sachs

fill in connected entity here

Wed, 02/10/2010 - 22:11 | Link to Comment Eally Ucked
Eally Ucked's picture

Western countries  should give them as much credit as possible (the only problem where the money would come from), I would give them a lot of credit with teaser rates, maybe even zero, for 2 years, and then reset. It did the trick on us, should finish them also!

Wed, 02/10/2010 - 22:12 | Link to Comment buzzsaw99
buzzsaw99's picture

We should build and finance them an over-priced crap-shack in the desert. lolololol

Wed, 02/10/2010 - 22:31 | Link to Comment ShankyS
ShankyS's picture

+100 LOL let them catch our financial STD (or FTD).

Wed, 02/10/2010 - 22:20 | Link to Comment moneymutt
moneymutt's picture

so true...

Wed, 02/10/2010 - 22:05 | Link to Comment Anonymous
Wed, 02/10/2010 - 22:19 | Link to Comment MarketTruth
MarketTruth's picture

Some History For ZHers

Remember that guy in Iraq, he dared to start selling oil in non-USD transactions. How dare someone break the petro-dollar link! Fast forward about a year or so and, well... even though there were no WMDs and the Taliban were not directly connected to Iraq, the USA MIL complex came in to defend the petro-dollar. Still to this very day the USA is wasting money in the region and making many enemies.

Ok Peabody, let us set the Wayback machine forward a few years. Iran opens up their oil bourse and begins to sell oil in the Euro and other non-USD currencies. Fast forward a bit more and here we are today ZH'ers.

The USA has tried various ways to 'trick' Iran by provoking them in many ways. Remember the FAKE MIL boat interaction with an Iran guard ship? (as one of many examples)

So far Iran has not fallen for these blantant attacks and has, frankly, played an excellent hand. Make no mistake, a  not a fanboy of Iran, just that it is interesting how the game between the USA/Iran is being played out.

Just some food for thought...

Things that make you go hmmm...

Then we have the whole NPT thing because Iran wants to have nuclear power... USA signed this treaty as has Russia, China, Japan and Iran... yet strangely Israel has many nuclear weapons yet is not part of the NPT. Why is a 'rogue' non-NPT nation like Israel allowed to have nukes yet never be confined and disciplined like other countries? Especially after the Goldstone report? 

Wed, 02/10/2010 - 22:23 | Link to Comment moneymutt
moneymutt's picture

doesn't forex work 24/7 - what does it matter if transaction is in one currency or another, cant' USD, Euros whatever be instantly flipped to some other currency... doesn't it just matter which currency gets more or less support in trading?

Wed, 02/10/2010 - 22:29 | Link to Comment Eally Ucked
Eally Ucked's picture

As long as all trade is USD, USA can print as much as they want and pay for purchases. If trade is in different currencies USA may have to buy those currencies and not everybody would accept it. The more trade is done in other currencies the more difficult situation gets for US.

Wed, 02/10/2010 - 22:32 | Link to Comment Hephasteus
Hephasteus's picture

The swap spread. If you say 1.38 euros is worth 1 dollar then when you go to exchange them they don't exchange them straight up. They take a cut called the swap spread. The entire freaking us economy has been floating off being the most in demand currency and funds itself in huge ways off the swap spread. They have developed tons of fantastic ways to manipulate the swap spread in case you haven't been paying attention to how the stock market works. They've probalby been using it in gold and forex market for YEARS before they finally adopted it to equities.

Thu, 02/11/2010 - 00:31 | Link to Comment MrPalladium
MrPalladium's picture

It matters.

If Iran sells oil in Euros and purchases what it needs with Euros, that decreases demand for dollars at the margin and forces everyone who buys oil from Iran to acquire Euros, increasing demand for that currency.

Is it a problem worth fighting a war about? Not in my book, but then perhaps the PTB have reasons to fear dollar flight that I do not know about.

Wed, 02/10/2010 - 23:36 | Link to Comment Going Down
Going Down's picture

 

"yet strangely Israel has many nuclear weapons"

 

US Secretary of Defense Robert Gates spoke as though Iran's announcement that it was going to try to make its own medical isotopes with low enriched uranium was tantamount to a weapons program. Gates said that if Iran did seem to be close to getting a nuclear warhead, it would provoke a nuclear arms race in the region. But it seems obvious that it is Israel's stockpile of some 200 nuclear weapons that is driving the already-existing nuclear arms race in the region.

 

http://juancole.com

 

 

Wed, 02/10/2010 - 22:10 | Link to Comment Carl Marks
Carl Marks's picture

I think we should take Iraq and Iran and combine them into one country and call it Irate. All the pissed off people live in one place and get it over with.
Denis Leary

Wed, 02/10/2010 - 22:13 | Link to Comment Carl Marks
Carl Marks's picture

If the battle for civilization comes down to the wimps versus the barbarians, the barbarians are going to win.
Thomas Sowell

Wed, 02/10/2010 - 22:37 | Link to Comment John McCloy
John McCloy's picture

"We are going to write you a letter and tell you were are very very very mad with you"

The U.N. is a complete farce. I expect the next 10 years of Iran/Korea and U.S. interactions to proceed more in line with this clip from a favorite film of mine now more than ever. Warning it contains language for all those 10 years old who love to troll financial websites on one of the largest snow days of the year.

http://www.youtube.com/watch?v=5TEvacFETvM

Wed, 02/10/2010 - 22:42 | Link to Comment daytradee (not verified)
Wed, 02/10/2010 - 22:53 | Link to Comment Missing_Link
Missing_Link's picture

^^ More Cetin spam; flag as junk please

Wed, 02/10/2010 - 22:57 | Link to Comment Anonymous
Wed, 02/10/2010 - 23:02 | Link to Comment putbuyer
putbuyer's picture

bonehead

Thu, 02/11/2010 - 03:28 | Link to Comment Anonymous
Thu, 02/11/2010 - 04:54 | Link to Comment boiow
boiow's picture

c'mon man, all you're doing is discrediting the very thing you wish to promote.

who do you think you are, ben bernanke.

also, just in case their's a limit to these 'junk' thingies i would prefer to use them on master bates and leo. thanks. (ive got my loyalties)

Wed, 02/10/2010 - 23:03 | Link to Comment Anonymous
Wed, 02/10/2010 - 23:05 | Link to Comment lsbumblebee
lsbumblebee's picture

And on and on and on and on it goes. Did we learn anything from Iraq? Now introducing the latest and greatest boogeyman...Iran. Under the terms of the Nuclear Non-Proliferation Treaty, Iran has a right to use nuclear technology for peaceful purposes. This includes power stations and medical isotopes. Enrichment to 20% is consistent with medical usage. Therefore, Iran's actions are legal under the terms of the Nuclear Non-Proliferation Treaty which Iran has signed right alongside the United States. By the way, Israel has refused to sign the Non-Proliferation Treaty, yet has hundreds of nuclear weapons. However, the U.S. corporate controlled media has brainwashed Americans into believing that Israel, like America, is a peaceful and innocent nation, constantly being attacked by barbaric savages "jealous of our freedoms". http://whatreallyhappened.com/WRHARTICLES/IranvIsrael.php

Wed, 02/10/2010 - 23:20 | Link to Comment colonial
colonial's picture

Does any reader think Isreal will listen to any of this?  I do not.  Tomorrow will be another bloody day in Iran

Thu, 02/11/2010 - 00:05 | Link to Comment jeff montanye
jeff montanye's picture

israel is certainly the tail that wags the u.s. dog for now, but its birthrate is low, most jews that want to emigrate have done so and it is occupying land that will soon include more arabs than jews.  like the big empire of the u.s.a., israel's little empire is costing a growing fraction of a declining economy, reducing the strength and credibility of its military, increasing the number and resolve of its enemies, breaking the morale of its people and turning it into an international pariah and its leaders past and present into indictable war criminals.  the internet is also bearish for israel as it makes the taboos of the u.s. and reactionary arab msm far less effective. 

Thu, 02/11/2010 - 00:12 | Link to Comment Actionpoint (not verified)
Thu, 02/11/2010 - 00:38 | Link to Comment Celsius
Celsius's picture

Cetin please stop the spam. We kicked you from SeekingAlpha for being a dick with your constant spam. Just move along, and try something else with your time. Like finding a job.....

Thu, 02/11/2010 - 05:57 | Link to Comment Anonymous
Thu, 02/11/2010 - 06:38 | Link to Comment dan22
dan22's picture

European, Russian and Chinese oil companies including Shell, Lukoil, CNPC and BP are having a field day winning auctions to develop big Iraqi oil fields. Shell and Petronas have obtained the right to develop Majnoon with 7 billion barrels of reserves, Lukoil and Statoil the West Qurna 2 field which in total holds 9.75 billion barrels, and Total and Petronas the Halfaya field with 0.5 billion barrels. The only US company that secured a deal is ExxonMobil over the development of West Qurna .
Quite a disappointment given the amount of money the US has invested in Iraq through the Iraqi war?
Maybe not!!
Different sources claim that their was a deal made between China, Russia, and the United States. China and Russia have been selling weapons to different terrorist groups in Iraq AND NOW THEY HAVE AN INTEREST THAT PLACE WILL BE SAFE AND MAY AGREE TO SANCTIONS ON IRAN

http://israelfinancialexpert.blogspot.com/2009/12/heavy-rumors-about-secert-deal-between.html

Thu, 02/11/2010 - 07:32 | Link to Comment Anonymous
Thu, 02/11/2010 - 08:03 | Link to Comment Anonymous
Thu, 02/11/2010 - 09:16 | Link to Comment blindfaith
blindfaith's picture

who the heck is Cetin???

So let the Russians, the French and especially the Chinese kiss the ass of Iran...it's all business you know (hating the USA is just a reason to crowd together and be friends).  But one day, these two timing nations will realize that they have played a game with a lionfish (look it up).  All these "friends" of Iran, forget that they have murdered, tortured, maimed, persecuted hundred of thousands of Islamic members inside their borders but Islam and Iran has not forgotten.   THAT will be the seeds of their destruction.  China thinks it is soooo cleaver now, but Islam has a memory and suicide bombers, and lips sealed tighter than any Chinaman (or American for that matter).  China doesn't get it, just like we didn't.  Russia and the French are just stupid and prefer money over nation. Play with fire, you get burnt.

Thu, 02/11/2010 - 09:18 | Link to Comment Youri Carma
Thu, 02/11/2010 - 09:30 | Link to Comment blindfaith
blindfaith's picture

damage done...few will read the corrected srory and those that do will not believe it.

Sat, 03/06/2010 - 02:36 | Link to Comment Anonymous
Sat, 03/06/2010 - 08:14 | Link to Comment Anonymous
Mon, 04/19/2010 - 10:24 | Link to Comment Tom123456
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