Iran Oil Embargo Will Hurt Turkish Exports, Help US
Author: sabah Posted April 4, 2012
Update: Since the original publication of this article, the Turkish government has indicated that it will cut back on imports of Iranian oil in order to avoid being sanctioned by the U.S. government. Turks remain angry at a perceived double standard that allows U.S. companies to continue to sell Iran wheat and other agricultural products and not face similar penalties.
Beginning July 1, Iran will be submitted to an embargo because of its nuclear activities. The US government recently added 12 countries to a blacklist for not reducing their imports of Iranian oil. Turkey is on this list.
At the head of the list of those importing Iranian oil is China, followed by India. The list also includes South Korea, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Africa, Sri Lanka and Taiwan.
What exactly will happen if these countries do not cut down on their imports of Iranian oil? The US has stated that it will punish them.
Washington’s Ambassador Francis Riccardone stated, “Turkey has to decide. Certain countries have reduced their Iranian oil imports substantially, and we expect Turkey and others to take similar steps.” Of course the ambassador did not specify how Turkey is to meet the cost of taking such a step. Turkey buys oil and natural gas from Iran, and sells finished goods to it in return. In 2011, we exported $3.6 billion's worth of goods to Iran and imported $12.4 billion. If Turkey stops importing Iranian oil, it will also be forced to stop exporting, and there will be a massive drop in bilateral trade. Nevertheless, the US continues to press Turkey.
Meanwhile, what is the US doing as it pressures Turkey to not buy Iranian oil? It sells wheat and other agricultural commodities and foodstuffs to Iran.
According to the US Department of Agriculture, Iran will import two million tons of US wheat through June. Tehran is also negotiating with India to buy three million tons of wheat. The sanctions applied to Iran allows foodstuffs exports. However, the US pressure on Turkey to cease importing oil also blocks the road for the exports of Turkish food — if Turkey does not import energy commodities from Iran, Iran will refuse to do business with it in terms of foodstuffs.
So who will be the winner in this? The US exports $120 billion's worth of foodstuff each year. By calling for Turkey to sanction Iran, the US is widening its own market in Iran. Iran has population of 78 million, and needs food badly.
There is a drought in Iran and the Middle East this year. Wheat production is expected to be low — hence the US interest in Iranian and Middle Eastern food markets. Moreover, the tension between Iran and Israel has also forced some countries to increase their strategic food stocks, which means more foodstuffs purchases.
Now, you may wonder how the US gets paid for what it is selling to Iran. After all, we may recall that the US has an embargo on Iranian money transfers. Certain banks have cut all ties to Iran. Therefore, Iran pays for its US imports by sending money to US firms via Middle Eastern and European banks. In this way, money transfers persist, despite the embargo.
In short, the US is telling Turkey to stop, and then starts selling on the Iranian markets. And this is what is called an embargo.
Read More: http://www.al-monitor.com/pulse/business/2012/04/usa-bans-turkey-sells-itself.html