Azernews.Az

July 1 figures to be a bad day for Iran -- that`s when hard-hitting EU sanctions on Iran`s oil exports take full effect.

The sanctions targeting the country`s economic lifeline are the EU`s toughest measures to date concerning Iran`s controversial nuclear activities. Economists believe they could slash Iran`s oil revenues by half.

Iran`s semi-official Mehr news agency quoted Mahmud Bahmani, the governor of Iran`s Central Bank, as saying on July 1 that Iran will not remain ``passive.`` He said Iran will ``confront`` hostile policies and has enough hard-currency reserves to meet its import needs.

Also on July 1, Iran`s Oil Minister Rostam Qasemi sought to downplay the embargo as just the latest punishment in decades of ineffective sanctions.

Tehran says it has stored imports and built up $150 billion in foreign reserves to reduce the impact of the embargo hitting the oil and banking sectors.

The United States and other Western countries accuse Iran of secretly developing nuclear weapons, while Iran has insisted its nuclear program is purely civilian. The United States, which has imposed its own sanctions, and its allies are looking to deprive Iran of much-needed oil revenue in the hope of constraining Iran to scale back its contentious nuclear activities.

The White House on July 1 praised the EU embargo, calling the move an ``essential part`` of diplomatic efforts in dealing with Iran.

The EU sanctions, formally adopted in late January, bar members of the bloc from buying Iranian petrochemical products and crude oil, and from insuring vessels that carry those products.

Many EU members, which accounted for about 20 percent of Iran`s oil exports before the sanctions, beat the July 1 deadline by implementing cuts seen as a blow to Iran`s already strained economy. Iran`s crude-oil exports have fallen by 40 percent this year, according to the International Energy Agency.

``A lot of these countries have already started to back out and essentially completed the backing out of that crude. So that`s around 600,000 barrels a day,`` says Jamie Webster, a senior manager of the Markets and Country Strategies Group at PFC Energy, a global consulting firm specializing in the oil and gas industry.

``Previously, before all of this latest rash of sanctions, Iran was exporting around 2.2 million barrels a day, so that is affecting them in terms of that customer.``

Insurance ban

Robin Mills, a Dubai-based energy economist and consultant, says the insurance sanctions on oil tankers are likely to hurt Iran further ``because that affects not only the EU, but it affects Asian nations such as Japan, South Korea, and so on.``

On June 26, South Korea became Iran`s first major Asian customer to announce a halt in imports from July 1 as a result of the EU insurance ban on tankers carrying Iranian oil.

Other Asian countries, including Japan and China, have reportedly also cut their imports from Iran by 18 percent. About 20 countries, including China and Singapore, have been granted exemptions from U.S. sanctions because Washington was satisfied that they had reduced their crude purchases from Tehran.

Iranian petrochemical exports are expected to suffer a major drop.

Mills says the insurance sanctions could bring down Iranian oil exports by another 400,000 barrels per day. ``Of course at the same time oil prices, which were very high in March, have fallen back quite significantly so that`s a kind of a double impact,`` he adds.

``So it could be that Iran`s oil revenues which were perhaps something like $100 billion to $110 billion during the last Iranian year, in this year they could be down to $45 billion to $50 billion,`` Mills notes, ``so the oil revenues could be cut in half overall with the combination of lower exports and lower prices.``