Iran fired back at the West for sanctions that threaten to cut as much as a million barrels from its daily oil sales.
Iran lashes out over sanctions
KUWAIT CITY // Iran has accused the West of using oil as a weapon by imposing aggressive sanctions.
In a speech to energy ministers in Kuwait yesterday, Rostam Ghasemi, the oil minister of Iran, said: "Iran has never initiated using oil as a political tool.
"Unfortunately, some big countries who are among the major energy consumers view oil as one of the basic constituents in their military, security and political strategies."
The United States and Europe are continuing to press Iran to give up its nuclear programme by imposing economic sanctions, including a European ban on imports of Iranian crude set to start on July 1.
Iran sits on the Strait of Hormuz, the narrow waterway through which a fifth of the world's oil passes, and there are fears that the West's stand-off with Opec's second-biggest producer could escalate into a military conflict. The tension has led the price of oil to climb by more than 17 per cent since the beginning of the year.
"Oil is not being used as a weapon," Charles Hendry, the British energy minister, said in response to Mr Ghasemi's comments.
Speaking on the sidelines of a producer-consumer conference in Kuwait, he added: "We are in a situation where we're looking at a very potentially aggressive situation, and the world needs to react."
Iran's crude sales could drop by as much as 1 million barrels per day (bpd), according to the International Energy Agency (IEA), which represents major energy importers.
Iranian officials deny that the sanctions have led to drops in sales or production.
"We think that the sanctions are more effective than Iran really wants to say," Eric Besson, the French minister of energy, said on the sidelines of the conference.
"The situation is extremely simple," he said.
"Iran does not respect its international obligations, and so we think that the sanctions that have been imposed on it are indispensable to lead it to change its position."
Yesterday, Brent crude, the European benchmark, was trading at US$125.94. Its all-time high is $147.
"Nobody wants to see a repeat of what's happened in 2008, where you had a very high spike leading to demand destruction and global recession," said Daniel Poneman, the US deputy energy secretary.
"Oil prices at current levels are so high that it is not consistent with sustained economic recovery."
The US has asked Saudi Arabia, home to most of Opec's 2 million bpd of spare pumping capacity, to turn on the taps in July once full US and EU sanctions come into force, according to Reuters.
The kingdom is already pumping at a high of 10 million bpd, according the IEA's market report.
"The Saudis have been very clear and very consistent about their commitment to meet market demand," said Mr Poneman.
"We strongly welcome those commitments, and we strongly welcome the role that Saudi Arabia has played year in, year out in providing a very strong force of stability in the global market."
In July, the US responded to supply outages from Libya through a stockpile release with the IEA, which holds a 1.6 billion barrel stockpile, enough to provide the market with an extra 2 million bpd for two years.
The IEA is ready to reach into its supplies again if there is a shortage on the market, said Maria van der Hoeven, the secretary general of the agency.
"We can act quite fast," said Ms van der Hoeven. "The trigger to do that is a serious disruption."