“If nothing changes over Iran’s nuclear program dispute, the risks will remain”

Posted on July 4, 2012


Unless there is a breakthrough in negotiations over Iran’s nuclear program little is likely to change in the coming months, Senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, James M. Dorsey believes.

Iran prepares to continue nuclear negotiations, a few days after the oil embargo was officially launched.

Iran and 5+1 group (Britain, China, France, Russia, and the United States plus Germany) held three sessions of talks in Baghdad on May 23 and 24 after an earlier round of negotiations in the Turkish city of Istanbul in mid-April.

Another round of nuclear talks was held in Moscow on June 18-19. The Iranian negotiating delegation in the Moscow talks was led by Secretary of the Supreme National Security Council (SNSC) Saeed Jalili, and the P5+1 group of countries was headed by Catherine Ashton.

Iran’s nuclear talks with the 5+1 group (the permanent members of the UN Security Council-the U.S., Britain, France, Russia and China) plus Germany finished their third round in Moscow on June 18-19, and are to continue in Istanbul where experts will go over technical details.

July 1 marked the beginning of the European Union’s ban on purchasing Iran’s oil. The European companies, who insure almost all of the world’s oil tankers, will also stop insuring those vessels carrying Iranian oil.

“The oil market has already discounted the kicking in of the sanctions in terms of supply and demand predictions as well as price,” Dorsey said.

“Purchasing Iranian oil already has become a cumbersome undertaking with insurance companies refusing to ensure Iranian cargo, shippers needing to prevent their vessels being subject to embargoes, and banks unable to handle Iranian transactions without being penalized.”

The expert believes that the risks for those violating the imposed sanctions will remain.

Many of Iran’s top oil buyers have chosen different ways of dealing with the sanctions. Japan insures the oil tankers by its own government, China asked Iran to provide insurance itself, and South Korea has halted the imports from the Islamic Republic altogether.

Last month IEA said Iran’s oil exports have decreased from 2.5 mbd to less than 2.0 mbd, and this figure is expected to fall even further to 1.5 mbd in the second half of 2012.

The analysts see Iran’s exports slipping by only 216,000 bpd in July, and marginally thereafter. That implies a total loss of exports at close to the 1.5 million bpd level.