A European Union embargo on Iranian oil went into effect yesterday, provoking anger in Tehran which says the measure will hurt talks with world powers over its sensitive nuclear activities.

Oil Minister Rostam Qasemi sought to downplay the embargo as just the latest punishment in decades of ineffective sanctions.

Iranian leaders have insisted they will forge ahead with their atomic programme, regardless of the Western restrictions and others imposed by the UN Security Council.

Oil market observer bodies and analysts say the embargo, coupled with US financial sanctions ramped up on Thursday, are gutting Iran’s vital oil exports, which account for half of government revenues.

The International Energy Agency (IEA) says Iran crude exports in May appear to have slipped to 1.5mn barrels per day (mbpd) as the market braced for the embargo, which has been phased in since being announced January 23.

That is far less than the 2.1-2.2 mbpd Iran insists it continues to sell abroad.
“The sanctions have had no effect on Iran and will have none,” Qasemi was quoted as saying yesterday by the ISNA news agency.

“I do not see a problem in our enemies starting the sanctions as of today (Sunday), since these sanctions have existed for many years and nothing has happened and one should not anticipate anything new,” he was also quoted as saying on the website of state broadcaster IRIB.

Qasemi and other officials admitted the “illogical” embargo had reduced exports to EU nations, but they said other nations had stepped forward to buy the oil.

“While we collectively exported 18% of our oil to them before, it is not difficult to substitute customers for this much oil in the world,” Qasemi said.

It was not possible to verify that claim because Iran has turned off the mandatory location transponders on most of its fleet of 39 oil tankers.

The IEA and experts say most of the tankers remain anchored off Iran and are being used to store up to 42mn barrels of oil unable to be exported.

Before the embargo, Europe bought some 600,000 bpd from Iran, which sent two-thirds of its exports to China, India, Japan and South Korea.

The US has granted exemptions to those Asian countries from its new sanction imposed on Thursday that targets foreign companies doing business with Iran.

That move averted a potential diplomatic row with China, Iran’s biggest oil customer, which greatly increased Iran crude purchases last month after a sharp dip earlier this year because of a commercial dispute with Iran. Beijing refuses to go along with the Western sanctions.

Non-EU nations wanting to buy Iranian oil face an obstacle in insuring the tanker shipments, as more than 90% of such insurance is by EU companies now barred from underwriting Iran oil delivery contracts. China gets around that by having its companies insure the tankers.

The EU embargo is the latest — and most punishing — of a raft of international sanctions designed to pressure Iran to curb its nuclear programme.

Most of the West fears that the Islamic republic is seeking to get to the cusp of being able to make nuclear weapons, despite Tehran’s repeated denials.

The sanctions are part of a “carrot and stick” approach running in parallel with revived talks between Iran and the “P5+1 group” comprising UN Security Council permanent members the US, Britain, France, Russia and China, plus non-permanent member Germany.

After three inconclusive rounds that succeeded only in defining the wide gap that exists between both sides, the talks have been downgraded to the level of experts, with the next meeting scheduled for Tuesday in Istanbul.

Iran’s chief nuclear negotiator, Saeed Jalili, warned the EU in a letter on Thursday that the new EU and US sanctions will have “repercussions” on the talks. He did not elaborate.

Iran has threatened to close the strategic Strait of Hormuz at the entrance to the oil-rich Gulf if its nuclear programme is targeted by air strikes that Israel and the US reserve as an option.

That threat, repeated since December, helped propel oil prices to a four-year high of $ 128 for a barrel of Brent North Sea reference crude in early March.

But since then overproduction by Saudi Arabia making up for the shortfall in Iranian exports, and fears of an economic dip caused by EU debt woes and China’s manufacturing slowdown, have pushed oil prices to below $ 100 a barrel.