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The Iranian Oil Embargo Blowback


If the sorry parade of European poodles – or what analyst Chris Floyd delightfully dubbed Europuppies – had any understanding of Persian culture, they would have known that blowback for their declaration of economic war in the form of an Iranian oil embargo would be nothing short of heavy metal. 

Better yet; death metal. The Majlis (Iranian parliament) will discuss this Sunday, in an open section, whether to cancel right away all oil exports to any European country that approved the embargo – according to Emad Hosseini, the rapporteur of the Majlis Energy Committee. And that comes with the requisite apocalyptic warning, relayed via the Fars news agency, courtesy of member of Parliament Nasser Soudani: "Europe will burn in the fire of Iran's oil wells." 

Soudani expresses the views of the whole Tehran establishment when he says that "the structure of their [Europe's] refineries is compatible with Iran's oil", and so Europeans have no alternative as replacement; the embargo "will cause an increase in oil prices, and the Europeans will be compelled to buy oil at higher prices"; that is, Europe "will be compelled to buy Iran's oil indirectly and through intermediaries". 

According to the EU sanctions package, all existing contracts will be respected only until July 1 – and no new contracts are allowed. Now imagine if this pre-emptive Iranian legislation is voted within the next few days. Crisis-hit Club Med countries such as Spain and especially Italy and Greece will be dealt a deathblow, having no time to find a possible alternative to Iran's light, high-quality crude. 

Saudi Arabia – whatever the oily spin in Western corporate media – does not have the spare capacity; and on top of it, the absolute priority for the House of Saud is high oil prices, so it can bribe – apart from repressing – its own population into forgetting about noxious Arab Spring ideas. 

So yes, already broken European economies would be forced to keep buying Iranian oil, but now from the winners of choice – middlemen vultures. 

Not surprisingly, the losers lost in these Cold War tactics anachronistically applied to a global open market are the Europeans themselves. Greece – already facing the abyss – has been buying heavily discounted oil from Iran. The strong possibility remains of the oil embargo precipitating a Greek government bond default – and even a catastrophic cascade effect in the eurozone (Ireland, Portugal, Italy, Spain – and beyond). 

The world needs a digital Herodotus to decode how these European poodles who claim to represent "civilization" were able, in a single stroke, to inflict simultaneous pain on Greece – the cradle of Western civilization itself – and Persia – one of the most sophisticated civilizations in history. In an astonishing historical replay of tragedy as farce, it's as if Greeks and Persians were bonded together at the Thermopylae facing the onslaught of North Atlantic Treaty Organization armies. 

Hit the Eurasian groove 
Now compare it with the action all across Eurasia. Russian Foreign Minister Sergey Lavrov said, "Unilateral sanctions don't help matters". The Ministry of Foreign Affairs in Beijing, exercising immense tact, nevertheless was unmistakable; "To blindly pressure and impose sanctions on Iran are not constructive approaches." 

Turkey's Foreign Minister Ahmet Davutoglu said, "We have very good relations with Iran, and we are putting much effort into renewing Iran's talks with the 5+1 [Iran Six – the United Nations Security Council permanent members plus Germany] mediators' group. Turkey will continue looking for a peaceful solution to the issue.” 

BRICS member India – alongside Russia and China – also dismissed sanctions. India will keep buying Iranian oil and paying in rupees or gold. South Korea and Japan will inevitably extract exemptions from the Barack Obama administration. 

All across Eurasia trade is fast moving away from the US dollar. The Asian Dollar Exclusion Zone, crucially, also means that Asia is slowly disengaging itself from Western banks. 

The movement may be led by China – but it's irreversibly transnational. Once again, follow the money. BRICS members China and Brazil started bypassing the US dollar on trade in 2007. BRICS members Russia and China did the same in 2010. Japan and China – the top two Asian giants – did the same only last month. 

Only last week, Saudi Arabia and China rolled out a project for a giant oil refinery in the Red Sea. And India more or less secretly is deciding to pay for Iranian oil in gold – even bypassing the current middleman, a Turkish bank. 

Asia wants a new international system – and it's working for it. Inevitable long-term consequences; the US dollar – and, crucially, the petrodollar – slowly drifting into irrelevance. "Too Big to Fail" may turn out to be not a categorical imperative, but an epitaph. 

Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007) and Red Zone Blues: a snapshot of Baghdad during the surge. His new book, just out, is Obama does Globalistan (Nimble Books, 2009). He may be reached at pepeasia@yahoo.com. 

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