The West Continues Iran Squeeze

Western-led sanctions are continuing to squeeze Iran’s banking system and hurt its oil production. Japan on 20 March added Iran’s third-largest bank, state-owned Bank Tejarat, to its blacklist of Iranian banks that allegedly help Tehran develop its nuclear program. This follows on the heels of the previous week’s decision by Europe to exclude Iranian banks from the SWIFT global banking payment system (see page 18).

Japan was on a US list of 11 countries exempted from sanctions, announced last week, due to Tokyo’s significantly cutting purchases of Iranian oil. The US list also includes 10 EU countries that will not be hit with sanctions as they have reduced energy dependence on Iran. It gives banks in these countries a six-month reprieve from the threat of being cut off from the US financial system. The US list excludes South Korea, Turkey, China and India. However, the US pressure is having an impact. Pakistan recently announced that a state-owned Chinese bank, which had agreed to finance the Pakistani section of the Iran-Pakistan gas pipeline, has pulled out of the project (see page 19).

Iran Oil Production Falls

The sanctions are hurting Iran’s oil production, which has fallen to a 10-year low of 3.38mn b/d in February, and could drop to levels last seen during the Iran-Iraq war in the 1980s, according to the International Energy Agency (IEA). And there is more pain to come. Consultancy PFC Energy says in a report: “A disruption to Iranian supplies is clearly in store for the months ahead. We placed the total disruption to Iranian supplies at 700,000 b/d. Shipping data suggest Iran may already be shutting in some production.”

Oman said recently that the risk of military conflict between Iran and the West was rising. Oman’s Foreign Affairs Minister Yusuf bin 'Alawi bin 'Abd Allah told Reuters : “We can see that the threat of an unfortunate flash of military confrontation is more possible rather than it is remote.” However, Kuwait’s Amir Shaikh Sabah al-Ahmad al- Sabah said on 20 March that Iran has assured its Gulf neighbors that it will not block the vital seaway. “We have received assurances from Iran that it will not take this step,” state-owned news agency KUNA reported.

In public, though, Iran continues the warlike rhetoric. Tehran will retaliate against any attack by Israel or the US “on the same level,” said Iran’s Supreme Leader Ayatollah Ali Khamenei, moments after US President Barack Obama appealed directly to the Iranian people. Mr Obama’s top counterterrorism adviser, John Brennan, offered Yemen’s government help to combat Iran’s alleged supply of fighters and weapons to rebels. The US has accused Iran of trying to destabilize the Gulf through Yemen, according to the Yemen Post .

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