(EnergyAsia, December 23 2011, Friday) — Asia, Russia and most of Europe are resisting Western pressure to further tighten trade and financial sanctions on Iran fearing their potentially catastrophic effects on the fragile global economy.

China and Russia have announced their opposition to further isolate the world’s fifth largest oil exporter, while most members of the European Union are reluctant to follow Britain’s hardline position and announcements by Germany and France that they are ready to suspend oil purchases from the Islamic regime.  Canada, the most removed player, is supportive of new measures to hurt Iran’s energy, transport and financial sectors.

Iran’s Oil Minister Rostam Qasemi has predicted that the European Union “definitely” will not impose sanctions on his country’s oil exports while the Iranian Foreign Ministry has warned that the loss of its 2.6 million b/d of supply would send crude prices soaring “above US$250 a barrel”.

OPEC Secretary General Abdullah al-Badri lent credence to these warnings by stating that Iran’s 450,000 b/d of oil export to Europe would be difficult to replace.

US ratings agency Fitch said the likely increase in oil prices would hurt oil refiners in Europe and Asia who are among its biggest customers.

Led by the West, the UN has hit Iran with four rounds of sanctions for continuing to develop its nuclear programme, which the US and its allies say is for military purposes. Amid fresh reports by the International Atomic Energy Agency (IAEA) that Tehran is seeking nuclear weapons, the US is moving to ban dealings with Iran’s central bank while the EU said it plans to impose more sanctions by the end of January.

Tensions between the two sides have escalated in recent months, leading to unconfirmed reports that the US, its Western allies and Israel with the support of Saudi Arabia are planning to launch military strikes against Iran and its purported nuclear projects.

In response to Britain’s announcement of new sanctions, a group of Iranians stormed and occupied the British embassy in Tehran last month. Britain retaliated by closing down its embassy and expelling all Iranian diplomats from London, while France, Germany, Italy, Spain and the Netherlands recalled their envoys. Also, last month, Iran captured a US reconnaissance drone aircraft inside its air space.

For now, the West, mired in its worst economic troubles in decades, appears to be drawing the line on imposing an outright oil embargo. While the Iranian economy would be hurt as it depends on oil exports for half its budget revenues, the impact on the Western economies could be just as devastating. Brent crude has remained well-supported at more than US$110 a barrel for most of 2011 despite the depressed state of the Western economies.

Global oil consumption continues to grow and the loss of Iran’s light low-sulphur crude at a time of tight supplies would push prices higher, and further hurt the US and Europe. Besides, Iran may not have much difficulty diverting its embargoed oil to Asia which has remained sceptical that the Islamic regime is a threat to world peace.

China, India, South Korea, Japan and India account for the bulk of Asia’s import of 1.4 million b/d of crude from Iran. China is Iran’s leading customer, buying more than 500,000 b/d, while India imports around 400,000 b/d.

Japan, a Western ally, has already indicated it will not join in the embargo as it is struggling to cope with energy shortages with the loss of its nuclear power capacity after the March 2011 earthquake and tsunami disaster. Iran is the fourth largest of oil to Japan after Saudi Arabia, the UAE and Qatar.

Like China, Russia has rejected outright any attempts to impost a global ban on Iranian oil. Russia has warned the West against any attempts to invade or attack Iran which will most likely also lead to a shutdown of the Straits of Hormuz through which 40% of oil from the Middle East flows.