G8 pressures Iran, ensures oil supply

2012-05-19 21:09
Maryland - Leaders of the Group of Eight major economies raised the pressure on Iran on Saturday, signalling their readiness to tap into emergency oil stockpiles if tougher new sanctions on Tehran threaten to strain supplies.

In unusually blunt language, the G8 put the International Energy Agency - the West's energy advisor responsible for co-ordinating reserves - on standby for action.

It was the clearest sign yet that US President Barack Obama is winning support for tapping government-held oil stocks for the second time in two years.

"Looking ahead to the likelihood of further disruptions in oil sales and the expected increased demand over the coming months, we are monitoring the situation closely and stand ready to call upon the International Energy Agency to take appropriate action to ensure that the market is fully and timely supplied," the G8 said in a communiqué after a summit at Camp David.

The meeting came just days before the next round of Iran talks, to be held in Baghdad. Western countries suspect Iran's nuclear programme is aimed at making a nuclear bomb, a charge Tehran denies.

The UN nuclear chief is also due to fly to Tehran on Sunday in an apparent bid to secure a deal enabling his inspectors to probe suspicions of atomic bomb research.

Unmistakable message

"All of us are firmly committed to continuing with the approach of sanctions and pressure in combination with diplomatic discussions," Obama told reporters at the presidential retreat in Camp David.

"And our hope is that we can resolve this issue in a peaceful fashion that respects Iran's sovereignty and its rights in the international community, but also recognises its responsibilities," he said.

Although it made no explicit mention of oil reserves, the message was unmistakable, analysts said.

"The word 'likely' signals further disruptions in oil markets don't need to be earth-shattering to potentially prompt action" to tap oil reserves, said Michael Levi, an energy policy fellow at the Council on Foreign Relations in New York.

Speculation has been growing that Obama would use an energy session at the G8 to seek support to tap emergency oil reserves before a European Union embargo of Iranian crude takes effect in July and tough new US sanctions come into force in late June.

Exports have already fallen by more than a fifth this year.

Exposure to criticism

The meeting also showed that this month's slump in oil prices has not deterred Obama from moving toward tapping the Strategic Petroleum Reserve (SPR) again - an unprecedented second release for a US president.

That could expose him to criticism from Republicans that he is using a national security tool to win votes this November.

Michael Froman, a senior White House aide, told reporters that although oil prices have been declining in recent weeks, they remain high. He said the G8 was committed to keeping global oil markets well supplied, but did not discuss any specific trigger that would prompt action.

"Referring to the IEA is a way to talk about the SPR, without talking about the SPR," said Levi.

Britain, France and Japan have all signalled their readiness to press ahead with a release of reserves, according to sources and media reports, although the head of the IEA and the European Union's energy chief have both recently said they see no need to act.

Germany too has resisted tapping stockpiles again, after last year's release to make up for Libya's disruption.

The statement also made an indirect reference to concerns that big producers - principally Saudi Arabia - may be running short of extra capacity to boost output further, more reason to ready emergency stocks.

12% tumble

Saudi Oil Minister Ali al-Naimi says the kingdom is pumping around 10 million barrels per day (bpd), leaving it another 2.5 million bpd in reserve. But some analysts fear it could not sustain output at that peak level.

"There have been increasing disruptions in the supply of oil to the global market over the past several months, which pose a substantial risk to global economic growth," it said.

"In response, major producers have increased their output while drawing prudently on excess capacity."

Saudi officials have highlighted the 80 million barrels it is storing at home and abroad, measures meant to assure consumer nations that it can keep the world supplied with crude without the need to tap into emergency stocks.

Tapping the reserves is not a foregone conclusion. It is unclear yet whether Obama and allies would opt to wait and see if Iran's exports fall and prices spike, or move pre-emptively to head off a speculative panic that could drive US gasoline quickly above $4 a gallon (3.78 litres).

US crude oil has tumbled 12% this month, dropping to the lowest since before a November UN report on Iran's atomic programme which kindled global fears.

Read more on:    g8  |  barack obama  |  iran  |  iran nuclear programme

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.