Background to the Iranian oil crisis
EU sanctions
The EU oil sanctions anticipated to be announced on
23rd January will prohibit all EU countries from
importing Iranian oil. The reality is that this will only impact
Greece, Italy and Spain, the only EU members who import Iranian oil
but it is widely expected there will be a carve out for these
countries to perform pre existing contracts in order to allow a
lead-in time of between 3 to 12 months. I estimate 6 months will be
agreed.
Traditionally, refiners buy two thirds of their oil under long
term contracts and the balance on the spot market. It is these long
term contracts which will likely be subject to the carve out, with
spot purchases ceasing immediately. Greece, Italy and Spain have no
doubt won significant carrots in return for their agreement to play
ball with their EU partners.
