Why US oil sanctions hurt Iran more than EU's
Stepped-up efforts by the European Union and the United States to hamper Iran's ability to export oil are moving into high gear.
The sanctions offensive by Brussels and Washington has had a significant impact upon Tehran.
Estimates vary, but analysts suggest that overall, Iran's oil exports could have been reduced by up to 1m barrels per day. That's some 40% down compared to average 2011 levels.
Accordingly Iran's revenues from oil sales are down too, though as yet there is no real indication that the sanctions are forcing a rethink in Tehran about its controversial nuclear activities.
On 1 July, a battery of EU sanctions come into force which prohibit imports of Iranian crude by any EU country. The EU used to account for some 23% of Iran's oil exports.
What makes the reach of the EU sanctions even greater, is that no European company will now be allowed to provide any financial or insurance services to assist in the selling or transportation of Iranian oil and petroleum products.
This means that many shipping lines whose tankers' insurance is brokered in London will either have to seek alternative arrangements or cease carrying Iranian petroleum exports or crude altogether.
This all comes on the back of a range of US measures which have sought to persuade the largest customers for Iranian oil in Asia to reduce their purchases.
China, India, Japan and South Korea have all scaled down purchases in recent months, with South Korea reportedly deciding to halt imports from Iran altogether from July.
The teeth in the US sanctions effort is the threat of measures against the financial institutions of any country perceived by Washington as not to be taking sufficient steps to reduce its dependence on Iranian oil.
This has prompted a rush to find alternative suppliers for at least part of their Iranian imports.
Accordingly the US has issued waivers to some 20 countries who have been reducing their purchases of Iranian crude, absolving them from financial sanctions, including most recently China and Singapore.
For some Europeans reducing their dependence upon Iranian oil has not been easy.
As Professor Paul Stevens, a senior research fellow at Chatham House notes, "the main importers of Iranian crude were Italy and Greece and both have been hurt".
Scramble for suppliers
"In particular," he says, "Greece has been hurt because it was receiving very favourable terms on its Iranian crude which no other supplier is likely to match."
But Prof Stevens wonders if the impact has actually been wider.
"Arguably all of the EU", he told me, "has suffered because the announcement of the embargo immediately created transitional price friction in the global market.
"This was as EU importers scrambled to find alternative suppliers increasing oil prices by $10 to $15 per barrel."
Only in the last few weeks has this "embargo premium", as he calls it, begun to dissipate as new suppliers have been sorted out and Saudi Arabia in particular has increased its production.
So what then of the impact on oil prices once these new EU sanctions come into effect?
"There probably will be very little immediate price response," Prof Stevens says, since "the market has already absorbed the information".
"Much will depend upon Iran's reaction," he adds.
"However, I do not expect any fireworks (literally or metaphorically) immediately.
"In the medium term the market is increasingly looking over-supplied so further upward pressure on prices is unlikely."
So EU imports of Iranian oil are being halted and the far more significant pressure from the US is encouraging Iran's big Asian customers to reduce their purchases.
But the collective sanctions, while certainly hitting the Iranian economy, do not appear to be having the desired political impact.
Nigel Kushner, of Whale Rock Legal, is a London-based lawyer specialising in sanctions matters.
He believes that the July EU sanctions are significant not so much because of the pressure they bring on Tehran, but "as a milestone that sanctions are not having the desired effect".
"There is also a sense of the EU shooting itself in the foot," he told me.
The EU were "dangling this oil ban threat over Iran's head in the hope that it would encourage them to negotiate in a meaningful manner. It failed".
He too believes that it is the US pressure rather than the EU measures that are really hurting Iran.
"The clout the EU has is dwarfed," he told me, "by the relative success the US has achieved in persuading those who buy Iranian crude to reduce purchases and drive the price down."
It is this US pressure, he argues, which is hurting Iran and reducing its foreign currency receipts.
"The danger," he warns, "is that Iran will want to increase its revenues.
"What better than a mini-conflagration in the region to achieve that? If the general price of crude rockets, then surely Iran may command a higher renegotiated price for the crude it sells."
So the tensions in the region could rise again. Many analysts are sceptical about the progress at the nuclear talks between Iran and the major powers.
One analyst, Trita Parsi, has described the diplomacy on Iran's disputed nuclear programme as being "on life support".
As the sanctions pressure bites, Iran and the other participants will have to decide if anything positive can come from the negotiations.
Mr Parsi believes that the "blame game", as he calls it, has already begun.
Could we again be looking at a long hot summer of tensions in the Gulf ?