Iran's biggest oil buyers were under renewed pressure last night to cut back on Iranian crude and back US sanctions against the increasingly isolated nation.
US Treasury Secretary Timothy Geithner urged leaders in Beijing to wean China off Iranian oil imports yesterday, before heading to Japan early today to push Tokyo to find alternative sources in the face of rising tensions with Tehran.
Geithner's trip to China came a day after Japan made overtures to the UAE and Saudi Arabia to provide it with more oil, and on the same day that India, Iran's second biggest customer, told refiners to reduce Iranian oil imports and find alternatives.
But while Japan and India appeared receptive to US overtures last night, China's response was couched in typically vague language, suggesting that Iran's major oil importer — with a demand estimated at 600,000 barrels of Iran's total 2.2 million daily exports in November — was reluctant to back sanctions.
"We urge all relevant nations to remain calm, exercise restraint, refrain from taking actions that will intensify the situation and make common efforts to prevent war," Chen Xiaodong, a top Chinese diplomat on Middle East affairs, told state media.
But analysts told Gulf News last night that the likely result of increased pressure from the United States will be that Iran will have to cut its prices.
"We think that many countries will be pushed to reduce their reliance on Iran or, in some cases such as China, will be able to negotiate a discount with Iran. But this does not mean that they will stop buying oil from it," Said Hirsh, a Middle East analyst at Capital Economics in London, said.
"Even the EU sanctions are yet to be finalised. Only the United States is in a position to impose sanctions since it does not have any dealings with Iran."
"Iran will have to discount its crude to compensate for the undesirability and political risk attached to it," Samuel Ciszuk, a consultant at KBC energy economics, added.
"But as long as it provides a sufficient price cut to tempt buyers, there is no real change to the global supply and demand balance."
Both analysts felt that although the UAE and Saudi Arabia are in a position to raise capacity, both countries may be reluctant to do so.
"There will be little attraction for UAE and Saudi Arabia to raise production much more, as that would douse the global markets and bring prices down," Ciszuk said.
Hirsh added that Saudi Arabia and the UAE will find it difficult to replace Iran as a source for Japan, India and China, especially given Beijing's enormous thirst for oil.
But he added that, unlike some analysts, he does believe that China will be receptive to US pressure. "The question is whether this will push China to stop importing from Iran. Given the likely discount, we don't think it is likely to halt oil imports from Iran," he said.
"Iran's economy will still be hit hard by sanctions, regardless of whether it can still sell a lot of its oil," Hirsh added.