Current Weather
The Spy FM

In Iran’s Oil Gambit, EU Nations Have Much To Lose

Filed by KOSU News in World News.
January 29, 2012

The Europeans are in the midst of their most serious economic crisis in 60 years, and now they’re hearing it’s not just their own fate they have to consider: The whole global economy hangs in the balance.

The International Monetary Fund last week warned that if Europe’s problems get any worse, it could push the entire world back into recession.

European Union leaders, meeting in Brussels on Monday, are said to be close to resolving some of their most difficult issues — and they’d better be.

IMF Managing Director Christine Lagarde has been busy reminding the Europeans what’s at stake.

“There’s no leader that I have spoken to in the last few weeks that has not mentioned the euro crisis as top priority on his or her agenda,” Lagarde said in a recent interview with the BBC. “The Europeans are clearly under huge pressure.”

Some economists question the IMF’s mostly pessimistic outlook on Europe. In fact, there are some positive signs: borrowing costs for the most indebted countries have actually gone down, and the European leaders are close to agreement on a big bailout mechanism. But Jacob Kirkegaard of the Peterson Institute for International Economics says some governments have had to do so many budget cuts that they’ve endangered their own growth prospects.

“That is the main reason, in my opinion, that we’re seeing a slowdown in the euro area as a whole,” Kirkegaard says, “and that both Italy and Spain are likely to fall back into recession in 2012.”

And then there’s the Iran problem. The European Union planned to institute its embargo on Iranian oil gradually, over the next six months. Countries that buy Iranian oil — Greece, Italy and Spain particularly — need that time to find alternative oil suppliers. But Iran has upset that plan with its threat to cut off the oil before those countries have a chance to prepare.

Cliff Kupchan of the Eurasia Group says they shouldn’t be surprised.

“Iran has a long history of saying, ‘OK, I’ll see you and raise you 10.’ This would be consistent with that pattern,” Kupchan says.

Iran currently exports about 600,000 barrels of oil each day to Europe, so it would lose revenue by shutting that business down. But Kupchan, a Middle East analyst, says Iran could fairly quickly find other markets for its oil; more quickly perhaps than the Europeans could find other sellers.

“I think it would be a lot more painful for the Europeans, in that they’re going to have to get the Saudis, primarily, to provide them with more supply,” he says. “That’s time consuming … I think Iran could cause distress to European markets if it does choose to go this route.”

Kupchan and other analysts say other governments would probably come to the rescue if Iran tries to punish Greece, Italy and Spain. But in the short term, at least those three countries could face higher oil prices.

Jacob Kirkegaard of the Peterson Institute says if they have difficulty replacing the lost Iranian oil, these fragile economies could quickly find themselves in much deeper trouble.

“This could easily be what pushes them, from my projection of a relatively mild and shallow recession, into something much deeper and longer lasting,” he says.

That longer lasting event could have the potential for destabilizing all of Europe, he says. And as goes Europe, so may go the global economy. [Copyright 2012 National Public Radio]

Leave a Reply

11PM to 5AM The Spy

The Spy

An eclectic mix of the Spy's library of more than 10,000 songs curated by Ferris O'Brien.

Listen Live Now!

5AM to 6AM The Splendid Table

The Splendid Table

Hosted by award-winning Lynne Rossetto Kasper, The Splendid Table is a culinary, culture and lifestyle program that celebrates food and its ability to touch the lives and feed the souls of everyone.

View the program guide!

6AM to 7AM Travel with Rick Steves

Travel with Rick Steves

"Travel with Rick Steves" is a fun, hour-long, and practical talk show with guest experts and calls and questions from travelers. This weekly program is a lively conversation between travelers and the experts as we learn to explore our world smartly, smoothly, and thoughtfully.

View the program guide!

Upcoming Events in your area (Submit your event today!)

Streaming audio and podcasts

Stream KOSU on your smartphone

Phone Streaming

SmartPhone listening options on this page are intended for many iPhones, Blackberries, etc. with low-cost software applications available to listen to our full-time web streams, both News on KOSU-1 and Classical on KOSU-2.

Learn more about our complete range of streaming services

We're perfecting the patient experience - Stillwater Medical Center