Money Matters - Simplified

Iran Halts crude oil supply to France and Britain

Iran stopped crude oil supply to France and Britain and deputed warships in Gulf of Hormuz.

Tension between Iran and western countries has intensified after the former stopped crude oil supply to France and Britain against the tightened EU sanctions.

The ban came on the eve when UN officials are coming to visit Iran over the disputed nuclear programme. It is considered to be a strong message send by Iran to EU, which was looking to pressurize Iran to shut its nuclear activities down.

Boycott and Reaction

The European Union decided to boycott Iran’s crude oil from July 2012 , which is the world's fifth largest crude oil exporter. Iran retaliated by threatening to close the main gulf oil shipping lane, Strait of Hormuz.

Iran's oil ministry made the matters more complex as it announced on Sunday that Iran has now stopped selling oil to French and British companies.

Apparently, Iran’s move to cut oil supply will barely affect EU as these countries are less dependent on Iran for oil.

The reason for the sanctions on Iran is its nuclear programme. US and its counterparts are alleging that Iran is developing nuclear arms whereas Iran has firmly condemned the allegations.

Iran's spokesperson, Ali Reza Nikzad asserted that its nuclear program was meant for civil purposes i.e.for meeting energy requirements and not for military purposes.

The 'New' Customers

The oil ministry’s news website Shana reported that they are finding new customers for selling crude oil after stopping supply to French and British companies.

Ali reza Nikzad said, “Exporting crude to British and French companies has been stopped ... we will sell our oil to new customers.”

Iran has also decided to increase the volume of crude oil it will ship to China. This would mean that whatever crude oil Iran had planned to export to France and Great Britain will go to China now.

UN envoy who reached Tehran today for a talk said that the chances of a major breakthrough are very less but they are hoping for co-operation from Iran’s side.

IAEA Envoy in Vienna said, “I'm still pessimistic that Iran will demonstrate the substantive cooperation necessary.”

Gulf of Hormuz

Chances of any negotiations are quite bleak after Iran deputed its two warships in the Gulf of Hormuz, in-spite of America’s warning. Gulf of Hormuz is the major route to transport Gulf's crude oil to America and European countries.

The ships are deputed through Suez Canal it is first time since 1979’s Islamic revolution that Iran is threating to close down the Gulf of Hormuz. It is expected that Iran's this move will further the gap between Iran and the western countries.