Tensions are sky-high as Iran flexes its military muscle – stepping up missile tests as it faces economic threats from the West.
Europe is now expected to join the United States in banning Iranian oil imports, with the row sparked by concerns that Iran is building a nuclear bomb – accusations that Teheran strongly denies.
Caught in the crossfire? Asia. Asia’s dependence on Iran stretches far and wide. China is the biggest customer, followed by India and Japan.
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Tim Geithner is traveling to Beijing and Tokyo this week to convince them to join the embargo. But with more than two-thirds of Iranian oil going to Asia, the U.S. Treasury Secretary faces a tough audience, according to commodities analyst, Jonathan Barratt…
“Oil is so important for these economies when you look at the imports of oil to this region. Particularly India with 96% and with Japan, you’re looking at around about 95%. Fifty-eight percent of its oil is imported in China, so once your cost of primary imports start to move up, that’s certainly going to affect the ability of these economies to weather the concerns that are developing, particularly in Europe.”
And on top of a slowing global economy, many Asian countries are still worried about inflation at home, says Lorraine Tan…
” When your costs of fuel go up, it creates a lot of pressure in terms of inflation, it creates a lot of pressure in terms of the corporate costs and energy costs.”
In fact, Asia may benefit as international sanctions come into effect and Iran loses more customers, since the region would gain leverage to bargain for cheaper prices.
Another of Iran’s top consumers – South Korea – has even agreed to buy more oil from Iran…
“It’s going to be an interesting form of diplomacy, where you’ll find that these economies – India, China and Japan – will probably get reduced prices for these imports of oil from Iran, because Iran needs to sell oil. But on the side, you’re going to see the United States and other nations trying to apply pressure for them to try and find other markets to source their energy needs”
So as tensions intensify between Iran and the West, Asia could prove the pivotal key.