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EU ban on Iran oil could be final blow to country's economy

But it could also hurt Germany's and Italy's too.

Strait of hormuz 1Enlarge
Iranian Army soldiers stand guard on a military speed boat during the 'Velayat-90' navy exercises in the Strait of Hormuz in southern Iran on December 28, 2011. (ALI MOHAMMADI/AFP/Getty Images)

JERUSALEM — After years of Israeli lobbying and discreet American prodding, the European Union took a preliminary decision to ban imports of Iranian crude oil, without setting a schedule for implementation.

Reuters reported that “the prospective embargo by the European Union, along with tough US financial measures signed into law by President Barack Obama on New Year's Eve, form a concerted Western campaign to hold back Iran's nuclear program.”

Iran claimed earlier this week to have produced, for the first time, a nuclear fuel rod, in bold defiance of UN and American warnings against its attempts to create an entire nuclear fuel cycle.

“This is a major economic setback for Iran, a very major economic setback for Iran. They will find it difficult to recuperate from this, more so now that China has also announced that it is reducing its purchase of oil from Iran,” said Meir Javendanfar, a professor at the Interdisciplinary Center Hertzlya and an expert on Iran.

“Iran was counting on China to take up the slack from customers who are leaving its side. It is also, of course, a major diplomatic blow for Iran. Unlike in the case of American sanctions, when it comes to the European Union it cannot claim the Israel lobby” is to blame for this new, tough line.

The European Union is slated to make a final decision by late January. If severe sanctions are put into place, Italy, Iran’s largest consumer of crude oil in Europe, and Germany, its largest industrial trade partner, are likely to pay a high price for the principled stand.

“If major European economies were not serious about sanctions they would not be making the proposal which they made today. But the Europeans will have to be careful so that by punishing Iran they don’t end up punishing themselves. But the fact that they have agreed to impose sanctions, yet are planning to do so gradually, may implicate that they are working on an alternative plan,” Javendanfar said.

Meanwhile, the German news agency DPA reported Thursday that Iran is planning to hold more military training exercises in the Gulf, following a 10-day naval drill that was viewed by the United States as an escalation in the war rhetoric.

In an earlier announcement, also Thursday, Israel and the United States revealed that they would be “soon” holding a joint exercise in long-range missiles. According to the Israeli daily Ha’aretz, Israeli sources claim the drill is “unrelated” to recent Iranian activity. The exercise will be called “Austere Challenge 12” and is designed to ameliorate defense systems.

Israel has previously deployed its "Arrow" missile system, which was explicitly designed to intercept possible Iranian missiles.

Israel considers Iran a major strategic and existential threat.

http://www.globalpost.com/dispatch/news/regions/middle-east/120105/eu-ban-iran-oil-economy