EU ban on Iran oil could end up the final straw that breaks Greece’s back

The recent decision for an EU wide ban on oil imports from Iran could end up being the final straw that break’s Greece’s back after EU officials said on Wednesday that European governments agreed in principle to ban imports of Iranian oil.

Several countries within the EU are heavily reliant on oil imports from Iran, and none more so than economically struggling Greece, which currently imports 30 percent of its domestic oil from the country, according to the International Energy Agency (IEA).

Greece Economic Collapse?

Greece’s economy is already mired in deep recession and could feasibly collapse entirely if the sanctions were imposed, according to Paul Stevens, economist and emeritus professor at Dundee University, Scotland.

“Let’s assume the European Union is stupid enough to go along with the US in imposing sanctions on Iran. That would only mean 250,000 barrels of heavy sour oil not coming into the EU.” Stevens said.

“But the impact that would have on countries like Italy and Greece would be enormous, and the Greeks are not going to slit their own throats for the sake of an EU sanction when Iran is the only country willing to offer them oil on favorable terms. It would utterly destroy the Greek economy.”

However Greece, increasingly dependent on imports of Iranian oil, will not break ranks with its EU partners to impose an oil embargo on Iran at a meeting this month, Greek government sources said on Tuesday.

“If the European Union decides to impose the sanctions, Greece will join them.” according to an official.

Greece Default?

Greece and Italy will default on their debts in 2012 but will not abandon the eurozone, as the continent’s policymakers will find away to keep the currency zone from falling apart, says Byron Wien, Vice Chairman of Blackstone Advisory Partners.

Worried that Athens will default on its debt, traders have pulled the plug on supplies and banks refuse to provide financing. Greece has stopped buying crude from Russia, Azerbaijan and Kazakhstan.

In the second quarter of 2011, Greece met 35 percent of its oil import needs from Iran, buying 111,000 barrels per day.

Search For Greek Oil

Earlier this week, Greece launched a tender inviting investors to search for oil in northern and central parts of the country, aiming to cut its energy imports bill and secure steady revenues in the long term.

Greek Minister Yiannis Maniatis has announced that he expects the first oil rig to be established before the end of 2012, as the government speeds forward with plans to exploit oil and gas reserves worth 25 billion euros.

Greece’s untapped oil reserves are estimated to hold 250 million barrels of oil worth around 25 billion euros. The government has been aware of the reserves for 15 years but failed to exploit them. According to the energy ministry there is already interest in the invitations to invest.

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EU ban on Iran oil could end up the final straw that breaks Greece’s back