2012-01-28 (China Military News cited from Reuters and by Dmitry Zhdannikov) — As the European Union prepares to ban Iranian oil and the United States turns the screw on payments, oil executives and policymakers say China and Russia stand to gain the most and Western oil firms and consumers may emerge the biggest losers.
Iran will continue to sell much the same volume of oil – 2.6 million barrels per day or around 3 percent of world supply – but almost all of it will flow to China, they reason. And being pretty much Iran’s only remaining customer, Beijing will be able to negotiate a much reduced price.
The EU will ban Iranian oil from July. The United States plans sanctions on Iran’s central bank and possibly its shipping firm. European headquartered oil firms such as France’s Total and Royal Dutch Shell have already abandoned Iranian oil purchases or are in the process of doing so.
Japan and South Korea have signaled they may reduce purchases of Iranian oil to comply with U.S. sanctions designed to put pressure on Tehran over its nuclear program.
That leaves a growing number of buyers competing for alternative supplies. Inevitably attention has turned to Saudi Arabia, the world’s biggest exporter and the only country that can quickly increase oil output and help the West avoid a price spike that would deal a severe economic blow.
The IMF said this week that crude oil prices could rise 20 to 30 percent if Iran were to retaliate by halting its oil exports altogether. Oil industry executives meeting in Davos said energy markets can afford to lose half of Iran’s 2.6 million barrels per day. That would be roughly equivalent to supplies lost during Libya’s civil war in 2011. They are confident Saudi Arabia will fill the gap.
“What we say is that oil is fungible. Iranian oil will still find its way into the market, to Asian markets, China and possibly at a lower price,” a top Saudi source told Reuters, speaking on condition of anonymity because of the sensitivity of the matter.
“But if let’s say 50 percent of Iranian oil is lost, we have spare capacity, we have the capacity to replace it as Libya has shown,” he added.
The chief of Saudi state oil monopoly Saudi Aramco, Khalid al-Falih, moved from one bilateral meeting to the next during the World Economic Forum this week. Over the past month or so the kingdom has received requests for additional oil from the European Union, Japan and South Korea. The European Union and Turkey buy almost a third of Iranian oil exports with the rest going to China, Japan, South Korea, India and South Africa.
“As a regular conversation we talked about increased supplies. Saudi Aramco is always positive,” Jun Arai, the head of Japan’s Showa Shell, told Reuters.
Russia too stands to gain from Western sanctions on Iran. The world’s biggest oil producer is well positioned to raise its market share in Europe, despite misgivings among some Europeans about relying too heavily on Russia for oil and gas. Payment disputes between Russia and neighboring Ukraine have in the past threatened transit gas supplies to Europe.
Hey! It’s a good opportunity for China to full practice capitalism! It must definitely cast the political issue aside and focus only in the economy’s question.
Perhaps never more will have an amazing chance to trade oil under a so favorable conditions!
You can thank the west for that….Once again,doing all the work while China sits back and does nothing.
You are too humble Pyro! Didn’t know u even have that trait. China is sitting back and enjoying the situation, not nothing. Why would China to do something favorable to you since you pretty much declared China ur top enemy of the century? Your enemy is my friend, isn’t that how you guys always used dictators against dictators?
@ Pyro:
Hey! What do you mean “China does nothing”? China consistently defends its allies against the West whose fight for foisting “democracy & freedom” on other countries depends primarily on either the oil reserves from those countries or how reverent they are related to the West’s “wisdom pills”. Thus, blissful Saudis and their human rights record, huh? They will never be chided by the West.
About the Saudis, I don’t read a single word whipping them on the vigilant Western media, always so worried with the lack of democracy
, for instance, about how their human rights policy toward minorities such as the women, the same basic human rights that the aware West claims for other “authoritarian” countries as Cuba, China, Sudan, Russia, Iran, etc…Hurrah for the democracy they implemented in the country! 
Oh! China being benefited by the West in its skirmish against Iran: anyway, does the West need (or not) China’s unveto in the UN Security Council? Need? So, urge Obama quickly to arrange cheap oil with the founding father of the Saudi democracy King Saud for China!
Once again,grouping the people of ones country,together with their government,is not smart thinking! That being said,I agree,Saudi Arabia is one of the worst regimes,when it comes to human rights….It’s almost as bad,as the authoritarian governments you mentioned!
My country should stay out of the internal affairs of those countries all together and even stop trading with them!
The US should produce its own oil(we have plenty,unlike china)and should open the proposed pipeline with Canada! China could have all the oil in the middle east,for all I care!
Excellent direction. Should just stick to getting oil from Canada.