Iranian oil embargo has a nasty ripple effect
When the US passed a law to impose sanctions on financial institutions dealing with Iran’s central bank, the punitive effects, supposedly meant to hurt the Islamic republic, were felt in far-flung places. Sri Lanka, for example, though a small buyer in terms of Iran’s overall oil exports, depends on Iran for 93 per cent of its crude oil, and is badly hit by the embargo. The situation is worsened by the fact that the country’s only refinery at Sapugaskanda, which is over 45 years old, can only handle crude oil from Iran and certain varieties from Saudi Arabia.
The US law signed by president Barack Obama on 31 December, bans from the US financial system any financial institutions paying Iran for oil, thereby effectively obstructing other countries buying it. The EU supported the US with a direct embargo on Iranian oil imports. The rest of the world has been given six months to ‘adjust’ before the sanctions take effect.
Sri Lanka enjoys friendly relations with Iran, which has helped out with a seven-month credit facility for oil imports, besides being a major buyer of tea and assisting in various development projects. On the other hand, the US is the country’s biggest trading partner. ‘We don’t want to antagonize any country,’ said Petroleum Industries Minister Susil Premajayantha, asserting that Sri Lanka had longstanding good relations with all concerned. While the government seeks a waiver of the sanctions from US authorities, it’s exploring the possibility of making good the shortfall through imports from Oman and Saudi Arabia. President Mahinda Rajapaksa told foreign correspondents in Colombo that ‘finally, the US and the West are not punishing Iran, but they are punishing us, small countries.’
India and China, the emerging Asian giants, have chosen to ignore the sanctions and use other routes by which to channel payments to Iran.
The Western sanctions are ostensibly aimed at punishing the Islamic republic for its nuclear programme. This is on the basis that Iran is believed to be developing a nuclear weapon. But US officials in their more candid moments have admitted that Iran does not have a nuclear weapon. When asked on CBS’s ‘Face the Nation’ on 8 January if Iran was trying to develop a nuclear weapon, US Defense Secretary Leon Panetta said: ‘No, but we know they are trying to develop a nuclear capability.’
The alarming aspect of the sanctions is that they are seen in many quarters as a precursor to military action. Analysts have warned that a US or Israeli strike against Iran’s nuclear facilities could ignite a major conflagration in the Middle East, since Iran would most certainly retaliate with the support of its allies in the region. Panetta earlier remarked that such a strike could ‘consume the Middle East in a confrontation and a conflict that we would regret’. That statement was met with outrage by the Israelis, who lodged a formal diplomatic protest with Washington.
Is the Western tendency to demonize Iran at odds with the reality? Iran, while it has not invaded anyone in recent history, has itself been the site of several ‘mysterious’ attacks on its nuclear scientists in the past few years. The most recent victim was Mostafa Ahmadi Roshan, who was killed by a bomb placed on his car in Tehran on 11January. Iran has accused the CIA of involvement; the US has denied the charge.
Iran asserts its right to develop nuclear technology for peaceful purposes, and is a signatory to the Nuclear Non-proliferation Treaty. The only nuclear power in the Middle East is in fact Israel, believed to have some 300 nuclear warheads. If anyone is under threat, by any realistic assessment, would it not seem to be Iran, and not the West or its Middle Eastern allies?
Lasanda Kurukulasuriya is a Sri Lankan journalist.