Iran issues stark warning on oil price

War of words over trade sanctions
Robert Tait in Tehran Monday January 16, 2006

Iran stepped up its defiance of international pressure over its nuclear programme yesterday by warning of soaring oil prices if it is subjected to economic sanctions. As diplomats from the US, Europe, Russia, and China prepared to meet today in London to discuss referring Tehran to the UN security council, Iran's economy minister, Davoud Danesh-Jafari, said the country's position as the world's fourth-largest oil producer meant such action would have grave consequences.

"Any possible sanctions from the west could possibly, by disturbing Iran's political and economic situation, raise oil prices beyond levels the west expects," he told Iranian state radio.

In a provocative move, Iran also announced plans yesterday to convene a "scientific" conference to examine the evidence supporting the Holocaust. The news comes weeks after President Mahmoud Ahmadinejad provoked a global outcry by describing the slaughter of 6 million Jews by the Nazis in the second world war as a "myth".

Mr Danesh-Jafari's comments echoed fears voiced by energy market analysts after crude oil prices last week rose above $64 (£36.50) a barrel as hopes faded of a diplomatic solution to the dispute.

Last week, Manouchehr Takin, of the Centre for Global Energy Studies, argued that crude prices could hit $100 a barrel if Iran stopped exporting. "Supply and demand are very tightly balanced," he said.

Mr Danesh-Jafari's warning added weight to veiled threats by Iran's president on Saturday. Iran had a "cheap means" of achieving its nuclear "rights", Mr Ahmadinejad said, adding: "You [the west] need us more than we need you. All of you today need the Iranian nation."

Recognising the danger, Gernot Erler, Germany's deputy foreign minister, said yesterday: "We are seeing desperate measures by Asian countries, mainly China, India and others, to get hold of energy resources, and for them Iran is a partner they can't do without." He said it was "dangerous" to put restrictions on trade relations "which could hurt one's own side more than the other side".

Iran's Islamic leaders insist that they want nuclear technology to satisfy its energy needs. The west suspects the intention is to produce a nuclear weapon.
But even amid the continuing rancour, some Iranian officials appeared to soften the bellicose stance. Calling for a return to negotiations, foreign minister Manouchehr Mottaki accused the west of over-reacting to Tehran's decision last week to remove UN seals and resume research at a nuclear plant in Natan, when Britain, France and Germany formally abandoned 2½ years of talks and demanded Iran's referral to the UN security council.

Although Britain has ruled out military moves against Iran, two American senators yesterday said the US might undertake a strike of "last resort" to prevent Iran obtaining nuclear weapons. The Republican John McCain told CBS: "Everything else has to be exhausted, but to say under no circumstances would we exercise a military option would be crazy." Democrat Evan Bayh urged diplomacy, but said there were elements of Iran's nuclear programme which, if attacked, "would dramatically delay its development".

White House spokesman David Almacy said: "The international community is determined not to let Iran develop a nuclear weapon. How we address that regime's continued non-compliance will be decided in the days and weeks ahead."

The UN security council issue will be the centrepiece of today's meeting, when EU and US officials will attempt to persuade their Russian and Chinese counterparts of the need for a referral, which could lead to economic sanctions.