Kai Ryssdal: Crude oil closed up just a tad in New York this afternoon, just under $100 a barrel. Not bad, all things considered, given that today the Europeans joined the effort to turn the economic screws on Tehran.
The European Union announced an oil embargo: They're not going to buy Iranian crude, or products made from it. Part and parcel with U.S. financial sanctions.
The whole point being to cut Iran off from the global economy. But how do you do that? From the Sustainability Desk, Marketplace's Scott Tong says it's easy -- you make companies understand dealing with Iran just ain't worth it.
Scott Tong: The sanctions will cut off European buyers of Iranian oil. Another target: the banks that process Iran oil deals. Washington plans to cut them off from the American market. And without banking middlemen, buyers like India are already hurting.
Amrita Sen of Barclays Capital.
Amrita Sen: India doesn’t want to necessarily stop buying Iranian crude. But Turkey, which is what India channels its payments though, is already saying ‘We cannot take your payments, because we don’t want to be sanctioned by the U.S.’
A third target: Iran’s central bank. Its assets are frozen by the Europeans. And fewer oil exports means mean less foreign currency coming in, which could throw the Iranian currency, the rial, into free fall.
Trevor Houser at the Rhodium Group says it’s already happening.
Trevor Houser: If I’m an Iranian, and I have my savings in rial, I’m not so sure about the long-term value of those rial savings. Then I try to move my money over to dollars. And as more Iranians demand dollars, the value of the rial plummets.
European sanctions, like America’s, will phase in over six months, which leaves time for Iran to find loopholes.
Dubai consultant Robin Mills.
Robin Mills: And the question would be, whether Iranian cargoes are going to be disguised or whether there’s going to be swaps with kind of friendly third-party countries to enable the Iranian oil to get relabeled or mixed with other oil or whatever to disguise its origin.
Years ago, Iraq got around embargoes. And now with oil at a premium, he expects Iran to try, too.
In Washington, I’m Scott Tong for Marketplace.