Iran threatens oil crisis in nuclear standoff

Thu Jan 19, 1:39 PM ET

TEHRAN (AFP) - Iran warned of a world oil crisis if sanctions are imposed over its nuclear program even as the United States and Europe struggled to get support for UN Security Council action.

"In case of sanctions, other countries will suffer as well as Iran," Oil Minister Davoud Danesh-Jafari said, according to the official news agency, IRNA.

"One of the consequences will be the unleashing of a crisis in the oil sector and particularly a price hike."

Iran, the number two oil exporter in OPEC with oil revenue last year of 42 billion dollars, risks being referred to the United Nations Security Council over what the West suspects is a covert nuclear weapons drive.

World oil prices this week hit a near-four-month high in New York, partly on fears of Iran sanctions.

The nuclear standoff came to a head when Iran broke international seals last week to restart uranium enrichment research which had been suspended for two years under deals with the Europeans.

But the United States and Europe are facing resistance, particularly from permanent UN Security Council members China and Russia, to their push for a referral to the world body and possible sanctions.

"We have been very clear that we believe the time has come for a referral of Iran to the Security Council," US Secretary of State Condoleezza Rice said in Washington.

Rice said Iran had been given adequate opportunities to resolve the nuclear issue through negotiations and prove to the world that it was not seeking nuclear weapons.

Russia, which is Iran's main partner in the growing civil nuclear programme, has been trying to steer away from a UN showdown. China has also opposed such a step.

Britain, France and Germany, backed by the United States, have called for an emergency meeting of the International Atomic Energy Agency (IAEA) on February 2, a first step before possible UN Security Council referral.

Iran insists it is not seeking to build nuclear weapons and that it has the right to develop atomic energy. It has threatened to suspend snap inspections by the IAEA if it is brought before the Security Council.

But the Western powers have rejected Iran's call for a return to direct talks, Britain describing it as "vacuous", unless there is a return to the fuel cycle suspension.

French Foreign Minister Philippe Douste-Blazy met with resistance when he held talks in Moscow with his Russian counterpart Sergei Lavrov to get support for UN action.

"We must simultaneously be united but also firm, to tell the Iranians to return to reason, to stop these dangerous nuclear activities and to let us negotiate together," Douste-Blazy told reporters after the talks.

But Lavrov reiterated Russia's attempts to strike a less confrontational stance.

"We need to act exactly as in medicine," he told journalists. "First understand what method is the most effective -- the scalpel or therapy. Only then do you understand all the aftereffects of further steps. Only then should you act."

As the world powers appeared split, Iran secured backing from Syrian President Bashar al-Assad, who pledged support for Iran's nuclear programme and rejected pressure on Tehran.

"We expressed our support for Iran in its pursuit of peaceful nuclear technology and we back the idea of a dialogue with international parties," Assad said after talks with Iranian President Mahmoud Ahmadinejad.

"We also reject the pressure being exerted on this country" over its nuclear programme, he said.

Tehran denied a newspaper report that Iran was moving billions of dollars in hard currency from European banks to Asia and said Europe had no right to freeze its assets.

Economy Minister Davoud Danesh-Jafari dismissed a report in pan-Arab newspaper Asharq al-Awsat that Iran had ordered government departments to withdraw currency from European banks, fearing possible sanctions over its disputed nuclear programme.

Danesh-Jafari described the news report as "politicized" and "media-driven."

"International law does not allow Europeans to do such a thing (freeze assets)," Danesh-Jafari said.

Iranian hard currency reserves in foreign banks, mainly European banks, are valued at more than 36 billion dollars.

A US senator said he planned to introduce a bill calling on President George W. Bush's administration to press governments around the world to shun Iran over its nuclear program.

Democratic Senator Evan Bayh, speaking on US television, said he plans to introduce his resolution Friday, calling for Iran to be excluded from international forums and events and asking the administration to urge other governments to sever economic relations with Tehran.