Iran expected to raise spectre of oil weapon

LONDON, January 27 (IranMania) - Iran is expected to raise the spectre of its oil weapon by lobbying at an OPEC meeting Tuesday for the cartel to cut exports of crude, a move that could send already high oil prices higher, AFP said.

The meeting in Vienna of the 11-nation Organization of Petroleum Exporting Countries comes only two days before the UN atomic watchdog meets, also in the Austrian capital, to decide on US and European calls for Iran to be taken before the UN Security Council for possible sanctions over its nuclear program.

Iranian Oil Minister Kazem Vaziri-Hamaneh has called on OPEC to reduce production by one million barrels per day (bpd).

But analysts say there is little chance the powerful oil cartel will do this.

"Considering where prices are now, flirting with their record level of August 2005 (70.85 dollars a barrel on August 30), OPEC has no justification for reducing the flow of oil," said French analyst Francis Perrin, who works for the magazine Pétrole et gaz arabes.

"But even if the chance of OPEC cutting production is almost zero, Iran is interested in letting people think it is ready to use the oil weapon," Perrin said, referring to Iran's cutting its oil exports in order to drive world prices higher.

"Considering the unpredictable nature of Iranian President Mahmoud Ahmadinejad, this option can not be ruled out," Perrin said.

Iran, OPEC's number-two producer behind Saudi Arabia, has called for a cut from April of a million barrels per day (bpd) from the current production ceiling of 28 million bpd.

The International Energy Agency, which represents oil-consuming countries, said in a statement that the world oil market could not absorb, without price dislocations, the loss of such "an important source of supply."

In 1973, OPEC cut its oil exports in retaliation for Western support for Israel in the Yom Kippur War, and world oil prices increased fivefold.

Iran produces 4.2 million bpd and exports 2.7 million bpd, mainly to China, Japan and Europe.

Iran has oil reserves estimated at 125.8 billion barrels, some 10 percent of the world total. The Islamic Republic also has 15 percent of the world's natural gas reserves.

The goal is to make "Western states meeting at the (watchdog) International Atomic Energy Agency (IAEA) think about the consequences of sending the Iranian nuclear dossier to the Security Council," said Frédéric Lasserre, an analyst at the CDC Ixis think tank of the French Caisses d'Epargne savings union.

The United States charges that Iran is using a nuclear program to generate electricity as a cover for covertly developing atomic weapons. Tehran denies the claim.

"The psychology of the world market is such that Iran does not even need to be credible about carrying out its threat. It only has to bring it up for prices to skyrocket," Lasserre said.

Oil prices have risen some 15 percent since Iran resumed uranium enrichment activities on January 10, setting off an international political crisis.

"The Iranian situation and the perspective of the matter going to the Security Council have added three dollars to the price of a barrel of oil," Lasserre said.

"And this is far from over," he said.

"Even if Tehran can not afford to cut for long its exports of crude, which represents 80 percent of its foreign currency earnings, such an action would drive up prices and seriously hurt the economies of those countries which are calling for sanctions," Lasserre said.

Four OPEC countries -- Indonesia, Venezuela, Algeria and Libya -- are on the IAEA's 35-nation board of governors that is to meet in Vienna.

Key Iranian oil clients China, Japan, France and Germany are also on the board.

The Iranian crisis may last months before international sanctions become possible, said Pierre Jolicoeur, from a security think tank in Montreal, Canada.