Israeli Prime Minister Benjamin Netanyahu at a session of the Knesset last week. Israel leaders have been discussing a possible strike against Iranian nuclear facilities. (PA)
[private]The International Atomic Energy Agency’s (IAEA) says it has “credible evidence” to suggest there are possible military dimensions to Iran’s nuclear programme in its latest report, published on 8 November.
Tehran has dismissed the findings for being politically motivated and reaffirmed that its nuclear programme is only intended to generate power. “This report is unbalanced, unprofessional and prepared with political motivation and under political pressure by mostly the United States,” Ali Asghar Soltanieh, Iran’s envoy to the IAEA, was quoted as saying by the BBC.
While rising international tensions over Iran’s nuclear programme have already impacted oil prices, European hub gas prices are unaffected. “The key to what happens next depends on how heated the row gets between the US, in particular, and Iran, we expect, and on whether markets believe that there is a real risk to supplies from Iran and via the Straits of Hormuz, should the situation escalate sufficiently,” Russian investment bank VTB Capital said in its report Iran/IAEA Report - Details and Implications on Thursday. “European hub gas prices have been considerably less reactive than oil which seems a comparatively sanguine response from gas markets given that 100 bcm/a [billion cubic metres per annum] of Qatari LNG transits the Straits and if oil tanker traffic is seen as threatened, then it is hard to see why LNG tankers would not also come to be seen as threatened.”
However, while any action that threatens to close the Straits would have a heavy impact on LNG and oil prices, “I don’t think the risk of a conflict has gone up that much after Tuesday’s IAEA report,” Samuel Ciszuk, senior Middle East & North Africa Energy Analyst at IHS Energy, told Interfax on Thursday. “Pressure will increase on Iran, and there will be more countries that participate in putting pressure on Iran after this because its case has been severely weakened.”
While Iran has been isolated from the international community by harsh economic sanctions, it is still the world’s third largest oil exporter and has not set a precedent for closing the shipping channel in the face of previous threats. However, there is a threat of Israeli launching a unilateral attack against Iran to destroy its nuclear capabilities, and Iran, in response, may close the Straits.
While taking military action is not Israel’s preferred outcome, “there is a debate about whether Israel should consider, as a last resort, unilateral military action against Iranian nuclear facilities,” Toby Greene, head of research and analysis at Britain Israel Communications and Research Centre told Interfax on Thursday. “Obviously, Israelis are aware that would come to very heavy costs to Israel and very high risks and no one in Israel is enthusiastic about that option, but there is a debate about whether or not that might be necessary.”
And while the threat of an Israeli attack may prove an effective tool to motivate the international community to act, “there is good evidence that Israel is not bluffing and is seriously considering the alternatives”, said Greene. “Not least because of the IAEA report showed in detail not only the development of technology for nuclear warheads, but that Iran is preparing to move part of its enrichment capacity to the underground facility at Qom, which would make it much harder to destroy militarily if it came to that.”
The US, France and the UK have already issued a call for increased sanctions against Tehran and other countries are expected to follow suit at the IAEA Board Meeting on 17-18 November. However, both Russia and China, Iran’s only two remaining allies in the UN Security Council, are reluctant to back fresh sanctions.
“China and Russia will always want to be the brake on any process, as long as possible, but they have agreed to previous sanctions rounds, or at least laid down their votes before, so it basically shows that the trend is for them to reluctantly go with it when enough international pressure from the West is put on them,” said Ciszuk. “Both Russia and China have used Iran as a way to gain leverage elsewhere, so in the end , when the US and European pressure is strong enough, they’ll negotiate a deal and get a quid pro quo on something else for being seen as being helpful in Iran. In a sense it [Iran] has been a very useful case for them.”
While still keeping a foot hold in Iran’s oil and gas sector, Beijing and Moscow have slowed investment in the country in the face of sanctions. In August, the National Iranian Oil Company (NIOC) threatened to seize control of the South Pars Phase 11 project from China National Petroleum Company (CNPC) if it did not speed development of the field (see CNPC in talks with Iran to revive South Pars development, 7 November 2011). While CNPC is trying to revive participation in the project, “if you look at what China is getting out from Iran, in terms of value, it’s not very much”, said Ciszuk. “And of course these companies are global players; they can’t break UN sanctions, or even US unilateral sanctions, without suffering for it, so they are being very careful. In the end they’re gambling on Iran not wanting to punish its last possible sources of investment, but no investment is actually flowing through.”[/private]
Gas market unresponsive to Iran nuclear report
Israeli Prime Minister Benjamin Netanyahu at a session of the Knesset last week. Israel leaders have been discussing a possible strike against Iranian nuclear facilities. (PA)
Tehran has dismissed the findings for being politically motivated and reaffirmed that its nuclear programme is only intended to generate power. “This report is unbalanced, unprofessional and prepared with political motivation and under political pressure by mostly the United States,” Ali Asghar Soltanieh, Iran’s envoy to the IAEA, was quoted as saying by the BBC.
While rising international tensions over Iran’s nuclear programme have already impacted oil prices, European hub gas prices are unaffected. “The key to what happens next depends on how heated the row gets between the US, in particular, and Iran, we expect, and on whether markets believe that there is a real risk to supplies from Iran and via the Straits of Hormuz, should the situation escalate sufficiently,” Russian investment bank VTB Capital said in its report Iran/IAEA Report - Details and Implications on Thursday. “European hub gas prices have been considerably less reactive than oil which seems a comparatively sanguine response from gas markets given that 100 bcm/a [billion cubic metres per annum] of Qatari LNG transits the Straits and if oil tanker traffic is seen as threatened, then it is hard to see why LNG tankers would not also come to be seen as threatened.”
However, while any action that threatens to close the Straits would have a heavy impact on LNG and oil prices, “I don’t think the risk of a conflict has gone up that much after Tuesday’s IAEA report,” Samuel Ciszuk, senior Middle East & North Africa Energy Analyst at IHS Energy, told Interfax on Thursday. “Pressure will increase on Iran, and there will be more countries that participate in putting pressure on Iran after this because its case has been severely weakened.”
While Iran has been isolated from the international community by harsh economic sanctions, it is still the world’s third largest oil exporter and has not set a precedent for closing the shipping channel in the face of previous threats. However, there is a threat of Israeli launching a unilateral attack against Iran to destroy its nuclear capabilities, and Iran, in response, may close the Straits.
While taking military action is not Israel’s preferred outcome, “there is a debate about whether Israel should consider, as a last resort, unilateral military action against Iranian nuclear facilities,” Toby Greene, head of research and analysis at Britain Israel Communications and Research Centre told Interfax on Thursday. “Obviously, Israelis are aware that would come to very heavy costs to Israel and very high risks and no one in Israel is enthusiastic about that option, but there is a debate about whether or not that might be necessary.”
And while the threat of an Israeli attack may prove an effective tool to motivate the international community to act, “there is good evidence that Israel is not bluffing and is seriously considering the alternatives”, said Greene. “Not least because of the IAEA report showed in detail not only the development of technology for nuclear warheads, but that Iran is preparing to move part of its enrichment capacity to the underground facility at Qom, which would make it much harder to destroy militarily if it came to that.”
The US, France and the UK have already issued a call for increased sanctions against Tehran and other countries are expected to follow suit at the IAEA Board Meeting on 17-18 November. However, both Russia and China, Iran’s only two remaining allies in the UN Security Council, are reluctant to back fresh sanctions.
“China and Russia will always want to be the brake on any process, as long as possible, but they have agreed to previous sanctions rounds, or at least laid down their votes before, so it basically shows that the trend is for them to reluctantly go with it when enough international pressure from the West is put on them,” said Ciszuk. “Both Russia and China have used Iran as a way to gain leverage elsewhere, so in the end , when the US and European pressure is strong enough, they’ll negotiate a deal and get a quid pro quo on something else for being seen as being helpful in Iran. In a sense it [Iran] has been a very useful case for them.”
While still keeping a foot hold in Iran’s oil and gas sector, Beijing and Moscow have slowed investment in the country in the face of sanctions. In August, the National Iranian Oil Company (NIOC) threatened to seize control of the South Pars Phase 11 project from China National Petroleum Company (CNPC) if it did not speed development of the field (see CNPC in talks with Iran to revive South Pars development, 7 November 2011). While CNPC is trying to revive participation in the project, “if you look at what China is getting out from Iran, in terms of value, it’s not very much”, said Ciszuk. “And of course these companies are global players; they can’t break UN sanctions, or even US unilateral sanctions, without suffering for it, so they are being very careful. In the end they’re gambling on Iran not wanting to punish its last possible sources of investment, but no investment is actually flowing through.”[/private]