EU states drawing up details of an oil embargo onIranhave given wide backing to a proposal to allow European entities to continue to receive repayments in oil for debts they are currently owed by Iranian firms, EU diplomats said.
The 27 states are also working towards a phased implementation of a ban on imports of oil and petrochemical products fromIran.
One diplomat said a consensus was emerging that the oil import ban should come into force after six months and the petrochemical product ban after three — similar to provisions inU.S.legislation — but other another stressed more discussion was needed before this issue was finalized.
EU states are due to agree new sanctions onIranover its nuclear program at a meeting of EU foreign ministers on January 23. They have already agreed in principle to ban imports of Iranian oil, but details on how and when this will be implemented still have to be finalized.
Greece,ItalyandSpain, three of the weakest EU economies, depend heavily on Iranian crude. They have been pushing for long «grace periods» to fulfill existing contracts to allow them to find other suppliers before implementing an embargo and reduce any shocks to their already troubled economies.
EU diplomats said the EU’s External Action Service — equivalent to the bloc’s foreign ministry — had proposed a continuation of the practice of receiving oil fromIranto repay existing debts, and there was broad support for this.
“Some Iranian companies have outstanding debts inEuropeand they reimburse their debt, not with currency but in oil,» an EU diplomat said. «It is suggested that this debt could continue to be reimbursed in oil. We are talking about existing debt — no new debt can be accumulated.”
The diplomat said the argument made was that if such reimbursements were not allowed, not only would EU entities not be able to recover their money, Iran would have more oil more available to sell to boost government revenues.
“So it would be counterproductive not to allow the reimbursement of this debt,» the diplomat said.
Another diplomat said the idea was based on a proposal byItaly. «It is now quite widely backed,» he said.
“Because it is such a repayment, it’s not a problem. It’s not scandalous because it achieves what we want to, which is to dry upIran’s resources. Now work needs to be done on the details.”
Another diplomat said the EU was likely to agree to review points on the oil import ban prior to implementation — after three months and perhaps six to ensure the benefits in terms of maintaining pressure onIranoutweighed any impact on the EU or the wider oil market.
Speaking to Reuters inRome, Italian Foreign Minister Giulio Terzi declined to comment on how long a grace period there should be on an embargo, but saidItalywas not holding back the issue.
“We are in favour of a gradual application of the embargo but even so we are aiming for quite a rapid introduction,» he said.
Iranhas been paying back Italian oil and gas group Eni for decade-old deals with oil for years and Eni CEO Paolo Scaroni has said Eni is still owed nearly $2 billion.
The EU is also planning new sanctions onIran’s financial sector but states have been divided over includingIran’s central bank in these sanctions.
Diplomats saidGermanyhad opposed the idea, but a German diplomat denied this, saying: «Germanyis actively taking part in the discussion on action against the Iranian central bank.”
One diplomat said discussions were focused on finding a formula that would stop short of a full ban on dealing with the central bank but nevertheless be effective in drying up funds toIran’s nuclear program.
Diplomats said negotiations to finalize the sanctions are expected to continue until next week.
EU measures againstIran’s oil industry will complementU.S.sanctions announced on December 31 that aim to make it impossible for most countries’ refineries to buy Iranian crude.
Iranis OPEC’s second largest oil producer afterSaudi Arabia, producing around 3.5 million barrels per day.
EU countries buy nearly 600,000 barrels per day (bpd) ofIran’s 2.6 million bpd in exports, making the bloc the largest market for Iranian crude, rivallingChina.
The three biggest EU importers have serious debt problems.Greeceimports a quarter of its oil fromIran,Italyabout 13 percent andSpainnearly 10 percent.
