Iran EU sanctions: Q & A

What sanctions has the European Union imposed on Iran?
The Daily Telegraph, 24 Jan 2012 – With immediate effect, no EU member state can sign a contract to import crude oil or refined petroleum from Iran.
Existing agreements will be honoured until 1 July, after which all imports must cease. In addition, the EU has introduced a range of financial restrictions, including freezing assets held in Europe by the Iranian Central Bank
The EU has imposed sanctions before, why are these different?
Because the oil industry forms the central pillar of Iran`s economy, providing most of the country`s export earnings and about 55 per cent of the national budget. Oil revenues poured some $90 billion into Iranian government coffers in 2010-11, compared with total expenditure of $165 billion. Iran now faces the loss of sales of almost 600,000 barrels of oil per day to the EU, 24 per cent of total exports.
Won`t Iran find other customers?
Probably yes. But EU sanctions will have the effect of creating an instant buyer`s market for Iranian crude. Because Iran will need to find customers for all the oil that once went to the EU, buyers will be able to insist on hefty discounts. China and India, Iran`s two biggest customers who imported 860,000 barrels per day last year, are likely to ask for lower prices. Iran may be in no position to refuse. The result will be that it loses billions of dollars of revenues.
Not without great difficulties. President Mahmoud Ahmadinejad is in the middle of reforming a hugely expensive subsidy scheme that holds down the price of basic essentials, including petrol.
The idea is to let prices to rise to market levels, but to compensate Iranians by giving them direct cash payments.
Every citizen is supposed to get 455,000 Rials from the government every month, or $40 at the official exchange rate.
If the government loses billions of dollars because of lower oil revenues, sustaining these payments may prove difficult.
Is there an alternative for Iran?
Six United Nations resolutions say that Iran must stop enriching uranium. The EU says that if Iran obeys the UN, the sanctions can be lifted. In the meantime, it wants negotiations with Tehran. The Foreign Ministers have agreed a clause saying that yesterday`s sanctions can be reviewed on 1 May. In theory, they could be lifted by that date if serious talks were to take place.
Is there any sign of Iran compromising?
Not yet. The country`s leadership appears united in its determination to continue enriching uranium, a highly sensitive process that could be used to make nuclear weapons. So far, the confrontation between Iran and the West shows no sign of easing.
Link: http://telegraph.feedsportal.com/c/32726/f/568307/s/1c13f9b4