Ahmed Elbatrawy

Oil surges after Iran uranium warning

Click to play

(Financial Times) — Oil prices surged on Friday as the UN’s nuclear watchdog said Iran had significantly increased its production of higher-grade uranium over the past six months and had failed to dispel concerns that it was pursuing atomic weapons.

Amid growing fears that Iran’s nuclear programme could prompt a military attack by Israel later this year, the International Atomic Energy Agency produced a detailed report into the state of Tehran’s nuclear programme which suggested it has ramped up the production of uranium close to weapons grade.

Oil prices rose sharply, with Brent crude, the global benchmark, hitting a fresh nine-month high of $125 a barrel. Prices have risen 15 per cent in the past month against the backdrop of growing tensions with Iran and supply disruptions in other, smaller producers such as Sudan, Syria and Yemen.

According to the IAEA, Iran had produced 73.7kg of uranium enriched to a concentration of 20 per cent — a level close to that needed for a nuclear weapon — in the 18 months leading up to last September. In the five months since then, it had produced an additional 35kg of uranium at its two enrichment plants at Natanz and Fordow.

“The agency continues to have serious concerns regarding possible military dimensions to Iran’s nuclear programme,” the Vienna-based UN body said in the latest quarterly report about Iran’s atomic activities.

‘Sanctions not impacting nuke activity’

Nuclear site Iran wants to keep hidden

The White House said the IAEA report demonstrated Iran was continuing to violate UN Security Council resolutions on its nuclear programme.

“When combined with its continued stonewalling of international inspectors, Iran’s actions demonstrate why Iran has failed to convince the international community that its nuclear programme is peaceful,” said Tommy Vietor, a spokesman for the National Security Council.

Paul Brannan, senior analyst at the Institute for Science and International Security, the Washington-based group that is an authority on nuclear proliferation, said the ramp-up in production shortened “the potential breakout time” for Iran to produce an actual nuclear weapon.

“This shows that they [Iran] are really following through on the decision to do enrichment at up to 20 per cent at Fordow. It is the stockpiling of greater and greater amounts of this uranium there that is really concerning,” he said.

Ehud Barak, Israel’s defence minister, has warned that Tehran’s nuclear research could soon pass into what he called a “zone of immunity”, protected from outside disruption.

The expansion in the number of centrifuges, used to enrich uranium, at Natanz from around 6,000 to around 9,000 was significant, Mr Brannan said. However he added that this activity was at Natanz, which is much more vulnerable to attack than the site at Fordow. “By doing this at Natanz, they knew that the IAEA was going to see that. They are not doing this in secret,” he said.

The report also included some signs that Iran’s programme was having difficulties. Information that the Iranians were installing a range of different cascades of centrifuges at Natanz showed they were having technical problems, Mr Brannan said.

Ed Morse, head of commodities research at Citigroup and a former US energy official, said the IAEA report had contributed to “an expectation of a supply dislocation that has led to the bidding up of oil prices”.

While crude prices remain below their 2008 record in dollar terms, when measured in euros and sterling the price of oil marked fresh records this week, raising concerns of an oil shock for already fragile European economies.

The International Monetary Fund warned of the threat to the global economy and Tim Geithner, US Treasury secretary, did not rule out releasing strategic oil reserves.

“A new risk on the horizon, or maybe not on the horizon, maybe right in front of us, is high oil prices,” David Lipton, the IMF’s first deputy managing director, told reporters in Mexico City, where leaders of the G20 meet this weekend.

Saudi Arabia has already increased its production to the highest in 30 years, as oil consumers seek to reduce their reliance on Iran.

“Saudi Arabia is boosting its production in response to heightened demand for its crude from several European customers and a few in Asia,” an industry source familiar with Saudi Arabian policy thinking said.

The US and its European allies are likely to argue in the next few days that the IAEA report is a cause of alarm. “Iran’s growing capacity to produce ever higher enrichment is something that seriously concerns the proliferation experts,” said a senior IAEA figure.

But while the US and Europe meant to press ahead with sanctions, Vladimir Putin, Russian prime minister, sounded a contrary note, saying he believed some nations were using fears that Iran could acquire nuclear weapons as a pretext to seek to “change the regime”.

“Under the appearance of a struggle to prevent the proliferation of nuclear weapons through the addition of another potential member of the nuclear club, Iran, attempts of a different kind are being made … to change the regime,” Mr Putin said.

Share this on:

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!

Ahmed Elbatrawy