Oil and Gas

EU Ban on Iranian Imports Remains on Target Despite Financial Crisis

Oil refinery and petrochemical complex, Mahshahr, Iran,

In ten days on July 1st a sweeping European Union ban on Iranian imports will go into effect in response to the Islamic Republic’s burgeoning nuclear program. In addition, and just as importantly, EU based insurance firms will no longer be able to insure any ship carrying Iranian oil.

Iran is OPEC’s second biggest oil producer behind Saudi Arabia. Oil analysts at Citigroup expect that Iran will still be sending out 1.25 million barrels a day, about half of last year’s production.

Brent crude is currently trading in the $95 dollar a barrel range , that’s down eleven percent year to date. Light sweet is in the $83 dollar a barrel range, down 15% year to date.

Ray Carbone is President of Paramount Options. He believes we’ll see an upward trend before the July 1st deadline but it’s unclear how high oil could go. Carbone says “it depends to a large degree on how much of Iran’s share of oil OPEC is willing to pump out and that’s still a question mark.”

Despite the EU ban several countries will still be importing Iranian oil. On the list of notable nations Russia, China, India and Switzerland. Japan will also continue to bring in some of Iran’s oil but less than half than it did a year ago.

Carbone believes more countries will find a way to buy Iran’s oil saying "where there’s a will there’s a way. If Iran is going to provide the insurance themselves and cut prices customers will take advantage. When push comes to shove Iran’s oil will be bought if it’s at a good price, sanctions or no sanctions."

Iran’s biggest private tanker operator has promised customers it will insure tankers carrying the Islamic Republic’s oil. In addition Japan is expected to pass a bill by next week allowing some government guarantees for private Japanese companies importing Iran’s oil.

The economic question marks in Europe had led some policy makers and business leaders in the EU to call for a delay of that July 1st deadline. But a spokesman for the EU told wire services this week “all the sanctions that are supposed to come into force on July 1 will come into force on July 1.” He added the EU believes this is a very important move and that it will increase the pressure on Iran.

As the clock counts down on the EU ban the group known as P5+1 including the U.S., U.K., France, China, Russia and Germany are engaged in tense talks this week in Moscow with Iran over the nuclear program. This is the third time this year they’ve met with no agreement in site.

Iran says its nuclear program is for peaceful purposes. The P5+1 and many other nations accuse Iran of developing its program for military use which goes against the nuclear non-proliferation treaty Iran agreed and signed in 1970.

Tune In:

For more on the EU’s Iranian oil ban watch CNBC's "Power Lunch" Monday, June 25 at 1pm eastern.

The former head of Shell’s US operations John Hofmeister will give us his unique perspective.

- Reported by CNBC's Jason Gewirtz