Iran to halt oil sales to 'some countries'

• Iran's oil minister said oil sales to "some countries" would be halted soon
• Seen as Tehran's attempt to pre-empt a looming European embargo

(Financial Times) -- Iran's oil minister said on Sunday that oil sales to "some countries" would be halted soon, amid pressure from the parliament that the government should pre-empt a looming European embargo.

"Iran has a market for its oil exports even with cuts [in sales] to Europe and will face no problem in this regard," Rostam Ghasemi told local journalists.

But the Iranian parliament failed to pass a proposed law over the weekend that would have banned oil exports to the European Union, apparently because of differences between the legislative body and the government of Mahmoud Ahmadi-Nejad.

Some Iranian parliamentarians said last week that the legislative body would pass such a law on Sunday in order to halt abruptly its oil sales to the European Union.

The export ban would have deprived European states of the time they need to find substitute sources of oil, and would probably have hit the economically weak countries of southern Europe.

Emad Hosseini, spokesman for the Iranian parliament's energy committee, said consultations were being held with concerned officials in the government, "to see where we stand and in what situation the contracts are".

The European Union approved a ban on oil imports from Iran last Monday but delayed its full implementation until July 1. The deadline was intended to give Greece, Spain and Italy enough time to find alternative supplies from other oil producers such as Saudi Arabia, Russia and Iraq.

Mr Hosseini still expects the drafting of the bill to be completed this week and then put before the parliament for approval. He gave no details on the timing or contents of the bill.

The talk of a pre-emptive ban, even if approval of the bill has been delayed, has already affected the physical crude oil market, traders and analysts said.

Another member of the energy committee, Ali Adyani-Rad, said any such bill would need further work to ensure it could "slap the EU strongly in the face".

"The government is not happy with the way the parliament is going to stop oil exports, which is self-damaging," said one oil analyst. "There might be some compromise by which the parliament takes the symbolic move and sends its political message without hurting Iran's economy."

The EU bought an average of 600,000 barrels a day of Iranian oil last year, which accounts for about 20 per cent of Iran's oil sales. China is Iran's biggest oil customer, importing about 500,000b/d of Iran's oil.

Ahmad Ghalebani, the head of the National Iranian Oil Company, said on Sunday that Iran could afford to cut its oil exports to Europe because it had "many other customers". But he warned western powers that the embargo could push up oil prices to between $120 to $150 a barrel.

"If the oil embargo against Iran is enforced, the European states will lose, but we are ready for a cut in oil sales to Europe," Mr Ghalebani said.

The impact of a ban could be felt very quickly in the Mediterranean as Iran ships crude from the terminal of Sidi Kerir, near Alexandria on the Egyptian coast. From Sidi Kerir to the oil refineries of Spain, Italy and Greece, tankers need between two and five days, far fewer than the traditional two to three weeks from the oil ports of the Gulf.

The price premium for Middle East and Russian crude, the main alternative to Iranian oil, saw a sharp price increase in the physical market last week as some refiners pre-positioned.

The EU's fresh punitive measures, which also include restrictions on financial transactions, are aimed at forcing Iran to stop enriching uranium to ensure its nuclear programme is not for military use. Tehran insists the programme is merely for peaceful purposes.

Iran allowed a ranking inspection team from the International Atomic Energy Agency (IAEA) to enter Tehran on Sunday for a three-day visit. The team is headed by Herman Nackaerts, the IAEA deputy director-general, and is expected to demand access to nuclear sites and seek answers from Iran on the last report by the UN nuclear watchdog, which said Iran had worked on a nuclear weapon design.

Ali Akbar Velayati, a senior adviser to Iran's supreme leader Ayatollah Ali Khamenei, who is believed to have the last say on nuclear policies, said the IAEA team could carry out their inspections. But he stressed that there was "no change in Iran's principles vis-à-vis the nuclear issue" and insisted that the country would not give up its "peaceful [nuclear] activities".

Additional reporting by Javier Blas in London

? The Financial Times Limited 2012