Sanctions on Iran, Libya could affect oil prices

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana predicted yesterday that crude oil prices could increase slightly as a result of the new U.S. law threatening sanctions against foreign companies investing in Iran and Libya.

"But actually, it depends on whether the oil importing countries heed the U.S. decision," Sudjana told the press at the Bina Graha presidential office yesterday.

U.S. President Bill Clinton signed a bill on Monday threatening to penalize non-U.S. companies that invest more than US$40 million annually in the Iranian and Libyan oil and gas industries.

The Clinton administration issued the sanctions after it held Iran and Libya responsible for a number of international terrorism incidents which have particularly harmed the interests of the United States.

"The problem for the oil importers will be where to get crude oil outside Iran and Libya," Sudjana said, adding that the sanctions will put European countries in a difficult position.

Under the quota scheme of the Organization of Petroleum Exporting Countries (OPEC), Iran has a production quota of 3.6 million barrels per day (bpd) and Libya 1.39 million bpd. OPEC set its total quota -- including a ceiling for Iraq -- at 25 million bpd.

Iraq, which has clinched an oil-for-food deal with the United Nations, will have a quota of 800,000 bpd from OPEC.

The Clinton administration's decision has drawn criticism many countries worldwide.

European Union Trade Commissioner Sir Leon Brittan stated that all members of the European Union will maintain their rights and interests if the U.S. law harms their economies.

In Bonn, German foreign minister Klaus Kinkel told state radio that the U.S. law contradicts the basis of the World Trade Organization and the Organization for Economic Cooperation and Development. "We have clearly said we will not accept them."

Switzerland and the Netherlands also vented anger at the U.S. move, while Australia, Russia and Japan threw their weight behind the European move to protest the new U.S. antiterrorism sanctions.

Iranian officials praised the European stand against the law and said that the sanctions were doomed to fail and would lead to the isolation of the United States. (13)