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What Threats of New Energy Sanctions in Iran Mean for Investors

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Congress's push will likely make room for other players eager to replace those who are fleeing.

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But Iran, which draws 80% to 85% of its income from oil revenue exports, does indeed look to the West for technology and financing, Vatanka argued. Energy issues are seen as strategically important to Iranians, which means US countermeasures will have an impact across the board, he said.

While Mahmoud Ahmadinejad's government may yearn for Western advances to boost its oil and gas sector, "from a political point of view, they won't give up their nuclear program just for the sake of energy technology," Vatanka added. Iran produces just above 5 million barrels a day and aims to boost that to more than 6 million barrels, he said.

"Their threat perception is totally different," he noted. "It's not even looking towards the West." Rather, he said, the Iranian government is focused on battling a "domestic issue" in the form of the country's rising opposition.

In some ways, the United States' unilateral sanctions on gas shipments to Iran would actually be a "lifeline for Ahmadinejad," asserted Patrick Disney, assistant policy director at the National Iranian American Council in Washington. The government has sought to cut gas subsidies for years, which drain 10% to 20% of the annual gross domestic product, but a "popular backlash" prevents such a move, Disney explained.

"If the US goes after Iran's gasoline imports, the government will have a free hand to drop these subsidies, blame the United States, and free up tens of billions of dollars per year," he maintained.

In this latest round of US sanctions, Western companies probably will walk away unscathed, experts say. That's because they have either not injected a huge amount of capital into the energy sector there or have already pulled out of the country, Vatanka noted.

The congressional bills will affect the top suppliers of refined petroleum to Iran, including the Netherlands, United Kingdom, France, and Switzerland, a Washington source said.

The ultimate impact of the proposed law depends on its enforcement mechanisms, the source told OilPrice.com. As it stands, Obama can "literally preclude [certain Western] corporations from operating in the United States. So every British Petroleum gas station, for example, would be closed in the US."

The White House is studying the final language of the bills, and wants "flexibility" to deal with those countries invested in Iran but also working with the United States in non-proliferation efforts regarding Iran, noted the source.

In the end, it's doubtful the president would actually "bring the ax down on British Petroleum in the US like that," conceded the source.

Right now, though, Congress seems to be pushing for radical steps that will shake up Iran once and for all.
No positions in stocks mentioned.

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