European threats to Iran

There's a lot of western spin on this and I am not convinced it's going to deal a crushing blow as billed here. All the other nations picking up Iranian oil will still be in competition for it. And I note that the story says it will take several months to implement. I think this is more about face-saving for the west as opposed to handing out body blows. The escalations had already gone to military deployments and actual attacks on installations and assassinations and the world would have none of it.

What I really expect the end result of this will be is to greatly accelerate the rate at which nations around the world are dropping the USD as reserve currency, and the currency for oil purchases.

Given Europe's economic disintegration I'm not going to get to excited about this. India is already moving rapidly in that direction. . -- MCR

EU prepares unprecedented attack on Iranian economy

The European Union is preparing to launch an unprecedented attack on Iran’s economy at a moment when experts believe the confrontation over the country’s nuclear ambitions is entering a dangerous new phase.

By David Blair, Chief Foreign Correspondent

8:00PM GMT 20 Jan 2012

the Telegraph, 

20 January, 2012

An embargo on Iran's oil is due to be agreed by EU foreign ministers on Monday, potentially depriving Tehran of a quarter of its total exports. This step, designed to maximise the pressure on Iran’s leaders to negotiate over their nuclear programme, is also a measure of the scale of concern.

Officials note a series of events, ranging from the storming of the British Embassy in Tehran to the regime’s threats to disrupt oil supplies in the Gulf, and judge that Iranian decision-making is becoming more belligerent and unpredictable.

“This is a dangerous moment. We’re coming to the point where options are narrowing and there’s very little fat left in the system,” said Paul Cornish, professor of international security at Bath University.

The EU is likely to phase in the oil embargo over between three and eight months so that Greece, Italy and Spain – who together buy 450,000 barrels of Iranian crude every day – can make alternative arrangements.

Iran should be able to find other customers: the surplus barrels will probably be redirected to Asian buyers, notably India and China. But officials anticipate they will drive a hard bargain and insist on lower prices, costing Iran billions of dollars in lost revenue.

In effect, an embargo would tell Tehran’s Asian customers to “buy Iranian oil, but only at a knockdown price which will destroy Iran’s revenues,” said Nigel Kushner, chief executive of Whale Rock Legal, a firm that advises on sanctions and trade.

This process has probably started already. China has cut its imports of Iranian crude by half this month, reducing its daily purchase to 285,000 barrels. Beijing probably judges that Iran’s oil will become much cheaper after any EU embargo starts to bite.

The foreign ministers are likely to balance oil sanctions with an offer to negotiate. Because of the consequences for its economy, however, Iran may ignore any conciliatory gesture and view this step as an escalation, possibly even a precursor to war.

“It will be easy for them to present it in that way,” said Mr Cornish. “We know what we mean by it, but will they see it in the same way? You can’t guarantee how they are going to react.”

China and Russia remain opposed to tightening United Nations sanctions on Iran. But after four UN resolutions designed to squeeze the Iranian economy, in addition to unilateral steps taken by the US and the EU, the effects are clearly showing. On Thursday, President Barack Obama said that sanctions had been “so effective that even the Iranians have had to acknowledge that their economy is in shambles”.

Underlying all this is increasing concern about the progress of Iran’s nuclear programme. Earlier this month, it entered a new phase with the onset of uranium enrichment inside a previously secret plant. This facility, dug into a mountainside near the holy city of Qom, could be immune from military attack.

Earlier, Iran took its enrichment programme a stage further, producing uranium at 20 per cent purity, instead of the 3.5 per cent needed to run nuclear power stations. The official aim is to produce medical isotopes in a civilian research reactor. But this brings Iran’s scientists a step closer to producing uranium at the 95 per cent purity needed to make nuclear weapons.

Its experts have also studied how to design nuclear weapons and load them onto ballistic missiles, according to the latest report from the International Atomic Energy Agency.

Experts and officials have no doubt that Iran wants the option of building a nuclear weapon. But there are questions about whether it would actually go ahead and build a bomb. “Iran is looking for a latent nuclear weapons potential or capability and not for nuclear bombs,” said Peter Jenkins, who was Britain’s permanent representative to the IAEA between 2001 and 2006.

Iran would then be in the same category as Japan and Germany, both of which have the technology to make nuclear weapons. “I don’t see the Iranians as being any more likely to make use of a latent capability than the Japanese, the Brazilians or the Germans,” added Mr Jenkins. “Capability would give them a lot of what they’re after at relatively low cost, whereas going the full way involves great risk.”

By seizing the ability to make a bomb, Iran’s regime could guarantee its own survival and extend its influence across the Middle East. If they were to take the final step and make a weapon, however, Iran would have to expel the IAEA inspectors, who currently monitor its declared nuclear facilities, and publicly withdraw from the nuclear non-proliferation treaty. Put simply, Tehran would have to place the entire world on notice that it was about to build a bomb.

Instead, Iran would probably prefer to be permanently on the verge of breaking out of these constraints and becoming a nuclear-armed power.

A secret effort is now underway to sabotage Iran’s efforts to reach “break-out” ability. In the last two months, one scientist and the head of the country’s missile programme have died in explosions in Tehran. In all, five nuclear scientists have been killed since 2007, while another was wounded by a bomb attached to his car and one more disappeared in mysterious circumstances.

The injured man, Fereydoun Abbasi, was then promoted to become head of the Atomic Energy Organisation.

“The situation certainly is escalating. What has been a covert type of activity is becoming more open,” said Mark Fitzpatrick, director of non-proliferation at the International Institute for Strategic Studies.

The most effective act of sabotage was the introduction of the Stuxnet computer virus into Iran’s main enrichment plant at Natanz in 2010. This caused hundreds of centrifuges to spin out of control and explode, forcing the suspension of all enrichment for emergency repairs.

But Mr Fitzpatrick said the ruined centrifuges had since been replaced and Iran had “recovered better than expected” from the Stuxnet attack. This virus, the most powerful yet devised, set back its efforts by “less than a year”.

The timing of any military strike on Iran’s nuclear plants would probably be determined by two factors: the success of covert efforts to delay the programme, and the steady transfer of centrifuges into the previously secret plant at Qom.

The development of this facility showed that Iran was “expanding what we call 'the zone of immunity’,” said Danny Ayalon, the Israeli deputy foreign minister. “This is the biggest concern we have right now.”

The immense effort that Iran is making to press on with enriching uranium is a measure of the regime’s determination to master this process, which breaches five UN Resolutions.

But Mr Ayalon judged that sanctions could still work. “Iran can be stopped by economic and by diplomatic means,” he said. “As radical and as dangerous as the Ayatollah regime appears, it is not completely irrational, especially when it comes to its own political survival.”

Others believe that Iran’s leaders have invested so much in the enrichment programme that they could not halt this effort, even if they were minded to do so. A wiser goal of Western policy might be to allow Iran to continue enriching, but only under the strictest IAEA safeguards. “Everything I’ve heard, read and seen makes me believe they will not concede a cessation of enrichment,” said Mr Jenkins, who negotiated directly with Iran as Britain’s representative at the IAEA.

In 2005, Iran offered a deal based on enrichment with state-of-the-art safeguards, he added. “We could have had a very good deal which would have given the IAEA excellent access, but we had to turn it down because our policy at the time was not a single centrifuge should be turning inside Iran,” said Mr Jenkins. This was “with hindsight, a profound mistake,” he added.

Allowing Iran to continue enriching uranium would, however, amount to running a permanent risk that it could become a nuclear-capable state. That would probably be intolerable not only to Israel but to Iran’s Arab neighbours.

Saudi Arabia would almost certainly respond by seeking a nuclear weapons capability of its own, said Jonathan Eyal, head of international studies at Royal United Services Institute. “The alternative for the Saudis is an absolute nightmare, in which they would be relegated to the ringside of the Middle East in perpetuity with the Iranians calling all the shots,” he added.

If sanctions and covert action – or even military strikes – succeeded only in delaying Iran’s progress, they would still be worthwhile, he argued. “Buying time,” said Mr Eyal, “is a perfectly respectable strategy.”