Tess Vigeland: The European Union is reportedly nearing agreement on a ban of imported oil from Iran. It's the latest move by the west to put pressure on the regime in Tehran over its nuclear ambitions. Last weekend, the U.S. announced a ban on all financial transactions with Iran's central bank.
But Europe's oil embargo, if it does materialize, would not be formally unveiled until the end of January. And even then it could take months to implement.
Our European bureau chief Stephen Beard joins us from London with some of the details. Hello Stephen.
Stephen Beard: Hello Tess.
Vigeland: Why is this decision appearing to be so difficult for Europe? Are they not as concerned as the U.S. about Iran's nuclear ambitions?
Beard: Yes, I think they are, but the Europeans have got a lot to lose here. The U.S. doesn't buy any Iranian oil; Europe buys more than 400,000 barrels a day of it -- 17 percent of Iran's oil exports. And the European countries that are most dependent on that oil are the most economically fragile -- Greece, Italy, Spain -- so the last thing they need is an oil shock, a big sudden loss of supply. So this has been a tricky issue for the Europeans.
Vigeland: And is there also concern about being able to get the oil that they need from other sources?
Beard: That's why they reckon it's going to take many months to implement this ban. They are now scrambling for alternative sources of supply. Angola is one possibility. Ultimately, though, everyone expects the Saudis will step into the breach and pump more crude, and it's believed the Saudis could fairly easily make up the shortfall.
Vigeland: Stephen, if the EU does impose sanctions, what impact does that then have on the global price of oil? Could it presumably then affect gas prices in the U.S. and Europe?
Beard: In a sense, it's already affecting the global price of oil. Just the talk of the sanctions and the Iranian threat to retaliate by stopping all oil shipments through the Gulf -- that's already pushed the global price of oil up by $6 or $7 a barrel. Ironically, that has benefitted Iran, because it's making more money from its oil. Whether oil prices will go much higher if the sanctions come into effect depends. Oil analysts say if there's the threat of conflict in the Gulf, that could push up oil prices further.
Julian Lee of the Center of Global Energy Studies says that what happened during the Iran-Iraq war in the 1980s.
Julian Lee: We saw a huge increase in insurance premiums for tankers entering the Gulf, which added to cost of delivering oil. I think, you know, if this escalates, you may well see the same sort of thing happening again.
So he says there are concerns that if this does escalate, that will keep oil prices fairly high in the months ahead.
Vigeland: Well, before we leave the subject, we should probably touch on what this means potentially for Iran itself. How much pressure could these kinds of sanctions put on the regime in Tehran?
Beard: Iran is going to have to find other customers. It already sells more than half its oil to China, India and South Korea, and these countries seem very unlikely to join in an oil embargo. So Iran could probably sell its surplus oil to these countries, but they're likely to drive a hard bargain -- China in particular -- and pay less for the oil. So Iran could certainly suffer. The Iranians are definitely worried.
Vigeland: Marketplace's Stephen Beard, joining us from London. Thank you so much.
Beard: OK Tess.