New Iran sanctions could lead to higher oil price

New sanctions by the United States, Britain and Canada that target Iran could drive down oil production in the country and push up oil prices in the long run, analysts said Tuesday, dpa reported.

Governments in Washington and Ontario announced Monday they would prohibit the sale of necessary equipment to Iran's energy sector.The two governments also joined London in cutting ties with Iranian banks.

The trio's move came as a reaction to a new report by the International Atomic Energy Agency (IAEA). IAEA said it has collected credible information indicating "that Iran has carried out activities relevant to the development of a nuclear explosive device."

The punitive measures will not affect production at existing oil wells in Iran, an analyst at Commerzbank in Germany, Carsten Fritsch, told dpa.

However, oil might trade at higher levels nevertheless, Fritsch added. "There is an effect, because a certain risk premium is warranted," Fritsch explained.

An escalation of the standoff over Iran's atomic programme could lead to spikes in the price of oil.

Iran is the second-biggest producer of the Vienna-based Organization of the Petroleum Exporting Countries (OPEC).

The sanctions also ban supplies to Iran's petrochemical industry, which exported 8-billion-dollars worth of products last year, according to Ehsan Ul-Haq, an expert with the British energy consultancy KBC.

In addition, the financial sanctions could make trade with oil and petroleum products even more difficult for the countrym which has already been affected by previous sanctions, he said.

This might lead to less oil production in Iran and higher prices globally. "At the moment, there is enough oil" to supply global markets, Ul-Haq said. "But if demand rises, there could be a problem."

Fritsch added that it might become difficult to finance new oil fields and to invest in Iran's energy sector if ties to the country's banks are cut. However, China might chose to step in and make up for missing Western funds, he added.


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