BRUSSELS, Jan. 6 (UPI) -- Energy traders in European markets are looking at securing substitute sources for crude oil if the ongoing diplomatic efforts fail to end a stalemate and prompt the European Union to stop importing oil and petroleum products from Iran.
EU energy importers aren't spoiled for choice, and costs of a switch are far from clear, analysts said. Before a possible EU-wide ban on Iran oil imports can take effect, the market uncertainties are pouring more profits into Iranian coffers as prices continue to spike.
Industry estimates put additional Iranian profits from the current upsurge at $40 million-$45 million a day, based on Iranian crude oil exports of about 2 million barrels a day.
Even if that export figure fluctuated with most information based on analyses of contracts and spot trade, the extra earnings handed to Iran could amount to about $1.2 billion through January alone, analysts said.
European consumer countries buy about 20 percent of their oil needs from Iranian sources. But they also buy from Arab suppliers shipping oil through the Strait of Hormuz.
Switching to another source could entail its own bureaucratic and logistical complications, which could be further exacerbated if that alternative source was an Arab supplier, such as Saudi Arabia, on the other side of potential flash point Strait of Hormuz.
With the Iranian-Western war of words raising the specter of the strait becoming blocked either through Iranian action or even an accident, European strategic interests lie in seeking a substitute for Iranian oil away from the Persian Gulf region in Africa or even Latin America.
Questions remain over whether Iran can or really wants to block the waterway, as doing so will choke a major source of its income.
Further questions remain on whether the strait, once blocked, can be cleared as easily or quickly as predicted in numerous prognoses bandied about in the media.
A blocked strait will escalate the problem of oil supply beyond Europe and European needs and trigger a global difficulty that will require Western control of the Iranian side of the waterway. The strait is about 34 miles at its narrowest point and is monitored by Iran from the north and by Oman from the south, in addition to all the international powers active in the area.
Past collisions in the waterway indicate that ships have to follow strict rules outlined in a Traffic Separation Scheme to sail up and down the strait.
Despite the 34-mile width at its narrowest point, the Hormuz Strait's actual tanker traffic lane is 6 miles wide, of which each of the inbound and outbound lanes take up a 2-mile stretch, leaving room for a 2-mile wide separating median.
Although tanker traffic averages about a dozen a day, sometimes a little more, there's a lot of essential consumer, defense and strategic shipping traffic, which is about as important as an estimated 15 million barrels of oil passing through daily.
The slightest glitch in the shipping routines has the potential to disrupt the delicate balance of the Strait of Hormuz maritime traffic. U. S. Navy units directly engaged with Iranian forces in and around the strait on April 18, 1988 -- four days after the U.S. guided missile frigate USS Samuel B. Roberts was crippled by an Iranian mine.
U.S. forces sank an Iranian frigate, a gunboat and six armed speedboats and damaged a second frigate. There was no major disruption to the oil shipping, however. Minor U.S.-Iranian naval incidents have continued since.
In January 2007 the U.S. nuclear submarine USS Newport News, traveling submerged, struck 300,000-ton Japanese supertanker Mogamigawa just south of the strait but no oil leaked as a result. However, analysts said, an oil spill in the strait would not be as urgent an issue as a waterway blocked by war debris that took time to clear. A day's delay in the oil shipments will unleash mayhem on the markets.
European oil traders are urgently looking at options for oil supply from the Mediterranean, including Libya, and west Africa.
