It appears that the Iranian government is being offered a choice: give up its quest to build nuclear weapons or risk losing some of the country’s most important oil customers.
The New York Times reports that the European Union (NYSEARCA:EU) will agree to ban Iranian oil imports by the end of January. Iran is OPEC’s second-largest oil producer behind Saudi Arabia, according to the U.S. Energy Information Administration (NYSEMKT:EIA), and the third-largest crude oil exporter in the world. Iran is estimated to hold 137 billion barrels of proven oil reserves, nearly 10 percent of the world’s total.
Revenue from oil exports is a key pillar of Iran’s economy. The EIA says the country’s net oil export revenues totaled $73 billion in 2010 and accounted for 80 percent of the country’s total exports.
Europe is one of the main destinations for those imports. This visual from Reuters shows Italy, Spain, Greece and France were top-10 importers of crude oil during the second quarter of 2011.
The EIA says sanctions recently adopted by the EU have already decreased export volumes to Italy and the U.K.
Diplomatic relations between Iran and the West regarding the country’s determination to enrich uranium have been contentious for some time. However, the current rhetoric and new policies such as the banning of Iranian oil imports have upped the ante.
This intense political chess match is one development that could significantly drive oil prices higher in 2012.
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