Iran Delays Debate on EU Oil Embargo amid Good Vibes about IAEA Visit

Iran on Sunday declared itself optimistic about the United Nations experts' visit aimed at probing suspected military aspects of its nuclear program, and its lawmakers postponed debate on a proposed halt to oil flows to the European Union watched closely in energy markets.

A team of International Atomic Energy Agency (IAEA) inspectors began a three-day visit to advance the effort to resolve a row about nuclear work that Iran says centers on making electricity but that the West suspects is aimed at eventually making a nuclear weapon.

Tensions with the West rose this month when the United States and the European Union imposed the toughest sanctions yet in a drive to force Tehran to provide more information on its nuclear program. The measures take direct aim at the ability of the second-biggest oil exporter in the Organization of the Petroleum Exporting Countries to sell its crude.

The Mehr news agency quoted Foreign Minister Ali Akbar Salehi as saying during a trip to Ethiopia: We are very optimistic about the outcome of the IAEA delegation's visit to Iran ... Their questions will be answered during this visit ... We have nothing to hide, and Iran has no clandestine [nuclear] activities.

Striking a sterner tone, Iran's parliament speaker, Ali Larijani, warned the IAEA team to carry out a logical, professional, and technical job or suffer the consequences.

This visit is a test for the IAEA. The route for further cooperation will be open if the team carries out its duties professionally, state media reported Larijani as saying. Otherwise, if the IAEA turns into a tool [for major powers to pressure Iran], then Iran will have no choice but to consider a new framework in its ties with the agency.

Iran's parliament in the past has approved bills to oblige the government to review its level of cooperation with the IAEA. However, Iran's top officials have always underlined the importance of preserving ties with the watchdog body.

Before departing from Vienna, IAEA Deputy Director General Herman Nackaerts said he hoped the Islamic state would tackle the watchdog's concerns regarding the possible military dimensions of Iran's nuclear program.

Parliament Debate

Less than one week after the EU's 27 member states agreed to stop importing crude from Iran beginning July 1, Iranian lawmakers were due to debate a bill on Sunday that would cut off oil supplies to the EU in a matter of days.

Now, Iranian lawmakers have postponed discussing the bill.

No such draft bill has yet been drawn up, and nothing has been submitted to the parliament. What exists is a notion by the deputies, which is being seriously pursued to bring it to a conclusive end, Emad Hosseini, a representative of the parliament's Energy Committee, told Mehr. Some MPs had an idea that should be studied by the energy committee before being drafted as a bill. We hope our discussions will be finished by Friday.

Refiners

By turning the sanctions back on the EU, lawmakers hope to deny the bloc the six-month window it had planned to give those of its members most dependent on Iranian oil -- including some of the most economically fragile in southern Europe -- to adapt.

The head of the state-run National Iranian Oil Company (NIOC) said late Saturday that the export embargo would hit European refiners, such as Italy's Eni, that are owed oil from Iran as part of long-standing buyback contracts under which they take payment for past oil-field projects in crude.

The decision must be made at high echelons of power and we at the NIOC will act as the executioner of the policies of the government, Ahmad Qalebani told the ISNA news agency.

The European companies will have to abide by the provisions of the buyback contracts, he said. If they act otherwise, they will be the parties to incur the relevant losses and will subject the repatriation of their capital to problems. ... Generally, the parties to incur damage from the EU's recent decision will be European companies with pending contracts with Iran.

Italy's Eni is owed between $1.4 billion and $1.5 billion in oil for contracts it executed in Iran in 2000 and 2001. It has been assured by EU policy makers its buyback contracts will not be part of the European embargo, but the prospect of Iran acting first may put that into doubt.

Eni declined to comment Saturday.

The EU accounted for 25 percent of Iranian crude-oil sales in the third quarter of last year. However, analysts say the global oil market will not be overly disrupted if parliament eventually votes for a bill that would turn off the oil tap for Europe.

The Saudis have made it clear that they'll step in to fill the void, said Robert Smith, a consultant at Facts Global Energy. It would not pose any serious threat to oil market stability. Meanwhile, Asians, predominantly the Chinese and Indians, stand to benefit from more Iranian crude flowing east and at potential discounts.

Potentially more disruptive to the world oil market and global security is the risk of Iran's standoff with the West escalating into military conflict.

Iran has repeatedly said it could close the vital Strait of Hormuz shipping lane should sanctions succeed in preventing it from exporting crude, a move Washington said it would not tolerate.

'Constructive Spirit'

The IAEA's visit may be an opportunity to defuse some of the tension. Director General Yukiya Amano has called on Iran to show a constructive spirit, and Tehran has said it is willing to discuss any issues of interest to the U.N. agency, including the military-linked concerns.

But Western diplomats, who have often accused Iran of using such offers of dialogue as a stalling tactic while it presses ahead with its nuclear program, say they doubt Tehran will show the kind of concrete cooperation the IAEA wants.

They say Iran may offer limited concessions and transparency to try to ease intensifying international pressure, but that this is unlikely to amount to the full cooperation required.

The outcome could determine whether Iran will face further isolation or whether there are prospects for resuming wider talks between Tehran and the major powers on the nuclear row.

Foreign Minister Salehi said Iran soon would write a letter to the EU's foreign-policy chief, Catherine Ashton, to discuss a date and venue for fresh nuclear talks.

Iran's top nuclear negotiator Saeed Jalili in this letter, which may be sent in the coming days, also may mention other issues as well, Salehi said, without elaborating.

The last round of talks in January 2011 between Jalili and Ashton, who represents major powers, failed over Iran's refusal to halt its sensitive nuclear work.

The talks will be successful as the other party seems interested in finding a way out of this deadlock, Salehi said.

(Additional reporting by Hashem Kalantari, Robin Pomeroy and Hossein Jaseb in Tehran, Svetlana Kovalyova in Milan and Fredrik Dahl in Vienna; Writing by Parisa Hafezi and Robin Pomeroy; Editing by William Maclean)