ATHENS — Add the prospect of running out of oil to the mountain of problems that Greece is already facing.

 

Iran’s threat this week to cut off oil to some European countries ahead of a boycott planned for July would do large harm to the Greece. Greece has been deeply dependent on Iran’s oil, which it purchases on generous terms of credit, crucial when few others trust Greece to ever pay them back.

 

Greece’s need for Iranian crude oil was the main reason a European Union boycott approved in January was delayed from going into effect until July, European diplomats say. And the possibility of a sudden cutoff in the midst of a catastrophic recession has many Greeks worried, despite European assurances that an alternative supplier would be found.

 

“It’s not a coincidence that Iran is targeting Greece right now, because Greece is the weak link of the European Union,” said Georgios Filis, a lecturer in international business at the American College of Greece. “We’re going to find ourselves in a very desperate situation.”

 

Whether the cutoff happens now or in July, the new suppliers will almost certainly be less generous with Greece, driving up gasoline and heating oil prices and further dampening the country’s economy as the government struggles to reduce debt and fight unemployment that has soared to 21 percent.

 

Many officials question whether Iran would actually carry out its threat to cut off oil to Greece, France, the Netherlands, Italy, Spain and Portugal if they do not continue their long-term contracts. 

 

But the prospect underscores the problems the European Union faces with both its diplomacy and its energy supplies, experts say. Although the bloc’s 27 countries strive for unity when confronting threats such as Iran’s nuclear program, their disparate energy sources often complicate those efforts.

 

 Greece imports roughly a third of its oil from Iran, about 100,000 barrels a day, said Leo Drollas, chief economist of the London-based Centre for Global Energy Studies.

 

Other oil suppliers want credit drawn from foreign banks, not Greek ones, because of the risks of the latter collapsing, he said.

 

“It essentially means prepaying for the oil,” he said. “A very large crude carrier carries 2 million barrels of oil. For a refiner to have to prepay, that would cause havoc with its cash flow.”

 

(Source: Washington Post)