Margareta Pagano: Straits stand-off could sink fragile growth in Europe

Midweek view: Saudi Arabia and Israel, for different reasons, hate Iran, while
the US hawks want regime change in the country

Six warships from the United States, Britain and France are on standby
patrolling the Straits of Hormuz, the entrance to the Persian Gulf from where a
fifth of all the world's oil exports comes through by ship.

Six warships from the United States, Britain and France are on standby patrolling the Straits of Hormuz, the entrance to the Persian Gulf from where a fifth of all the world's oil exports comes through by ship.

Messrs Sarkozy and Cameron, together with Mrs Merkel, are threatening to impose unprecedented economic isolation and an oil embargo on Iran unless it abandons its nuclear ambitions quickly. In turn, the Iranian regime is threatening to close the Straits and once again there are fears Israel will lead the way with a strike against the Iranians if they don't back down.

Yet, despite all this sabre-rattling, the oil price has hardly budged. It's astonishing but it's still sticking in the $112 a barrel range where it has been over the last few months.

Even the stock markets seem remarkably blasé. Oil traders appear to be confident that if the sanctions go ahead, the gap in supply will be made up by Saudi Arabia.

But an embargo on Iran's oil will hurt us all in different ways; but it may well hurt us in the West more than it hurts them. It's the world's fifth-biggest supplier, producing about four million barrels a day. Approximately 20 per cent of Iran's total oil comes to EU countries – about 600,000 barrels a day are imported, interestingly by Greece, Spain and Italy, Europe's most vulnerable countries.

One of the reasons they import from Iran is precisely because they are vulnerable – they get better credit arrangements from the Iranians. Existing oil contracts can continue but the EU is banning any new ones after July.

This means that Greece, Italy and Spain have quickly got to get new oil sources, not easy in current circumstances. Another worry is that Iran may hit out first with its own pre-emptive strike and stop supplying the oil already promised.

Louise Cooper, a market analyst at BC Partners, said countries such as Greece could be hit hard if Iran were to stop supplying oil which is already on order: "Even traders are surprised at how the oil price hasn't shot up yet, suggesting this could be because they have a greater appetite for risk as the world economy is looking a little brighter and it's the beginning of the year for trading books. Or it's because they haven't woken up to the dangers yet."

Oil analysts suggest Iran can get around the ban because it will sell more to China and the East. It will also be able to get oil out of the country via pipelines to Turkey and Egypt. Iran will probably have to offer discounts, which would add to pressure on the nation's finances.

In the past month alone, Iran's currency – the rial – has already lost about 20 per cent of its value over fears that this latest crisis could turn into a global conflict. As a result, food prices and other consumer goods have rocketed, and an already frustrated population is facing greater hardship.

It's going to take a few months for these sanctions to take effect, but the only relevant question to ask is whether they will have an impact at all on changing Iran's nuclear policy. If past experience of sanctions is a guide, then the answer is no.

There is also the danger that the Western ships in Hormuz will only serve to unite the Iranian population against the regime, and steel President Ahmadinejad's resolve for a fight. Is that what the West wants?

There's a danger the bellicose statements from Messrs Cameron and Sarkozy are just a cover for the real geopolitics in the region: Saudi Arabia and Israel, for different reasons, hate Iran, while the US hawks want regime change in the country.

Economic sanctions are not the clever way to win over the Iranians, and could hurt Europe's already fragile growth prospects more than we can imagine.

Jaw jaw, not war war has to be the best approach.

Start your day with The Independent, sign up for daily news emails
News
Bobbi Kristina Brown with her mother Whitney Houston in 2011
people
News
The actress Geraldine McEwan was perhaps best known for playing Agatha Christie's detective, Miss Marple (Rex)
peopleShe won a Bafta in 1991 for her role in Oranges Are Not The Only Fruit
News
The guide, since withdrawn, used illustrations and text to help people understand the court process (Getty)
Ministry of Justice gets law 'terribly wrong' in its guide to courts
News
Starting the day with a three-egg omelette could make people more charitable, according to new research
scienceFeed someone a big omelette, and they may give twice as much, thanks to a compound in the eggs
PROMOTED VIDEO
News
newsPatrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
News
Robert Fraser, aka Groovy Bob
peopleA new show honours Robert Fraser, one of the era's forgotten players
Life and Style
Torsten Sherwood's Noook is a simple construction toy for creating mini-architecture
tech
News
Top Gun actor Val Kilmer lost his small claims court battle in Van Nuys with the landlord of his Malibu mansion to get back his deposit after wallpapering over the kitchen cabinets
people
Sport
David Silva celebrates with Sergio Aguero after equalising against Chelsea
footballChelsea 1 Manchester City 1
News
i100
ebooks
ebooksA special investigation by Andy McSmith
News
peopleHere's what Stephen Fry would say
Arts and Entertainment
tv
News
Richard Dawkins is known for his outspoken views
people
Life and Style
L’Auberge du pont de Collonges (AFP)
food + drinkFury at British best restaurants survey sees French magazine produce a rival list
Arts and Entertainment
Bourne's New Adventures dance company worked with 27 young Londoners to devise a curtain-raiser staged before New Adventures' performance of Edward Scissorhands
theatreStar choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links