Iran’s Call for Oil Embargo on Israel Roils Markets

NY Times-Oct 18th2023

The prospect of an oil embargo arising from the conflict between Israel and militant groups contributed to a sharp but brief jolt in oil prices on Wednesday.

Iran’s foreign minister, Hossein Amir-Abdollahian, called for Islamic countries to boycott Israel, including stopping oil shipments, according to Iranian media. He was speaking at a meeting of the Organization of Islamic Cooperation in Jeddah, Saudi Arabia.

Although Israel imports nearly all its oil, analysts said that such an embargo would probably have little immediate impact, because the country does not buy oil from major Persian Gulf producers like Saudi Arabia and the United Arab Emirates or Iran.

Instead, Kazakhstan, where oil is mostly produced by joint ventures involving Western companies including Chevron and Exxon Mobil, and Azerbaijan are among Israel’s biggest suppliers. Nigeria is also a substantial supplier.

But just raising the specter of an embargo conjured up memories of the ban on oil shipments initiated 50 years ago during the 1973 Arab-Israeli war. The embargo, imposed by Arab members of the Organization of the Petroleum Exporting Countries on the United States and some other countries for their support of Israel, led to long lines at gasoline pumps in the United States and higher oil prices that continue decades later.

Worries about a broad embargo seem partly responsible for sending prices for Brent crude oil, the international benchmark, up to about $93 a barrel, from $91.50, on Wednesday. Brent prices later eased back.

“People are mostly just afraid of what is there to come in the future,” said Viktor Katona, an analyst at Kpler, a firm that tracks petroleum shipments.

It would be a big leap for major producers like Saudi Arabia to follow Iran’s lead into some wider confrontation with the West. “There is no sign yet that other OPEC members would be on board or willing to join in such an action,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm.

But Israel could be vulnerable to damage to its ports or a cutoff in shipments. Aware of the risks, Israel appears to have been careful to maintain supplier relationships with diverse sources, Mr. Bronze said.

Already, one of its two major oil ports, Ashkelon, has at least temporarily stopped receiving oil, apparently for safety reasons, analysts said. Israel can still receive oil through another port at Haifa, north of Tel Aviv, although Mr. Katona said it had not received any fuel for more than a week. He added that Israel had at least a month’s supply of oil on hand in storage tanks.

Mr. Katona estimated that Israel imports about 270,000 barrels of oil a day, with about 90,000 barrels a day, or one third, coming from Kazakhstan and 50,000 barrels a day coming from Azerbaijan.

Kazakhstan and Azerbaijan have majority Muslim populations, but they are unlikely to join the Iranian foreign minister’s call for an embargo. They are not among the states in the Middle East like Jordan and Egypt, whose public closely monitors tensions between Israel and the Palestinian populations in the occupied West Bank and Gaza.

Stanley Reed reports on energy, the environment and the Middle East from London. He has been a journalist for more than four decades. More about Stanley Reed