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Hormuz closure would send oil prices soaring: IMF
by Staff Writers
Washington (AFP) Jan 25, 2012

Any blockade of the strategic Strait of Hormuz by Iran would send oil prices soaring by more than $30 a barrel, the IMF said in a report released Wednesday.

The International Monetary Fund made the warning last week in a document prepared for a meeting of G-20 deputy finance ministers in Mexico, naming it as a key risk for the already shaky global economy as the West jacks up pressure on Tehran over its suspect nuclear program.

The Fund said that a somewhat broad embargo on Iranian oil, effectively taking 1.5 million barrels a day of Iran's exports off the global market without another producer compensating for it, risked pushing the market price for oil up 20-30 percent, "about $20-30 a barrel currently."

"A Strait of Hormuz closure could trigger a much larger price spike, including by limiting offsetting supplies from other producers in the region," the report said.

Iran has threatened several times in recent months that if Europe, the United States and their allies try to shut down the country's oil exports, it would close the narrow Hormuz strait.

The waterway which links the oil-rich Gulf with the Arabian Sea and beyond is crucial to the global economy, as about 40 percent of global oil exports pass through it.

Pressure grew this week on Tehran after the European Union agreed to halt imports of Iranian crude, closing off an outlet for about 600,000 barrels a day.

Saudi Arabia has stepped up production to compensate for that loss, and could match more market shortfalls if pressure on other countries like China and India to stop buying Iran's oil is successful.

But, the IMF warned, the Saudi buffer is also at risk with a Hormuz closure.

"A blockade of the Strait of Hormuz would constitute, and be perceived by markets to presage sharply heightened global geopolitical tension involving a much larger and unprecedented disruption.

"A blockade would also neutralize a large part of current OPEC spare capacity. Alternative routes exist, but only for a tiny fraction of the amounts shipped through the Strait, and they may take some time to operationalize while transportation costs would rise significantly."

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India says still buying Iran oil, despite new sanctions
New Delhi (AFP) Jan 25, 2012 - India's oil minister said Wednesday the energy-hungry nation was continuing to import oil from Iran and was not bound by new sanctions imposed by the European Union.

The EU agreed earlier this week to an embargo on Iran's vital oil exports as part of an intensifying US-led campaign aimed at forcing Tehran to abandon its nuclear programme.

"We, as a member of the UN, are obliged to follow UN sanctions. Other sanctions imposed by big blocs of countries -- we can have some freedom there," Petroleum Minister S. Jaipal Reddy told reporters in New Delhi.

"As of now, supplies (from Iran) are on," Reddy said, adding that New Delhi was continuing to explore ways to pay Iran for its crude purchases.

An Indian delegation visited Tehran last week, but Reddy would not divulge the outcome of their talks.

Officials say India could pay partly in rupees that Iran could then use to buy Indian imports, but that would not cover the the entire oil purchase bill.

Iran is India's second-largest oil supplier after Saudi Arabia, providing around 12 percent of the fast-growing country's crude needs at an annual cost of around $10 billion.

India currently routes its dollar payments for Iranian crude through a Turkish bank -- an avenue that might be closed off as Washington ratchets up pressure on the Persian Gulf state.

"The Indian government has clearly indicated that they do not intend to order Indian refiners to curtail their purchases" and that it may even increase its purchases, said Greg Priddy, global oil director at Eurasiagroup.

China has also refused to bow to US pressure not to do business with Iran.

India, which imports around four-fifths of its oil needs, has been racing to secure new supplies of oil and gas to sustain its strong economic growth.


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Republican pipeline bill raise legal questions: US official
Washington (AFP) Jan 25, 2012
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