Saudi Arabia Unable to Fulfill Oil Pledge

A CONTRIBUTOR | JANUARY 2012 | SOURCE: Fars News Agency

Analysts believe that Saudi Arabia cannot live up to its promise to fill the oil-supply gap in case the US-led European Union imposes a ban on Iranian oil supplies.

Analysts said failure could put further price pressure on markets already roiled by tensions linked to efforts to curb Tehran's peaceful nuclear program.

Saudi Arabia Unable to Fulfill Oil Pledge

There are encouraging signs that the West is re-examining the prospects for a diplomatic solution. But that does not mean the European Union is likely to drop proposed measures to ban Iranian oil imports from mid-year that are due to be discussed by its foreign ministers on Monday.

Iran fired back this week after Ali al-Naimi, the Saudi energy minister, said in interviews that his country could step up crude output to fill the gap if sanctions cut into Iran's 2.2 million barrels of daily oil exports.

Strategically, the Saudi pledge came between President Barack Obama signing a bill that included financial sanctions geared to deter foreign companies from doing business with the Iranian crude export sector and the EU deliberations over banning Iranian crude.

Tehran has warned that if Saudi Arabia, Iran's partners in the 12-member Organization of the Petroleum Exporting Countries, embarks on such an act, it will then prove to be part of the alliance ranged against it.

Manouchehr Takin, an analyst at the Center for Global Energy Studies ( CGES) research group, said a removal of Iranian oil exports would hurt Europe more than Tehran.

"The Europeans are importing nearly half a million barrels per day ... Refineries in Greece, Italy and Spain are the main customers. They would suffer very much immediately financial loss (in event of sanctions) because they cannot easily replace that Iranian crude with other crude," he told AFP in December.

"Financially, I think these refineries in Europe - specially those three countries that are having financial problems - would lose and suffer more than Iran would lose in finding other customers," Takin added.

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