The Greece Iran Oil Connection

As the west prepares a steep set of sanctions geared to stifle Iran, Greece raises an important query. The debt laden Hellenes would like to know what will happen to their vulnerable economy if the nation’s preferable Iranian oil supply contracts are replaced with more costly sources? Furthermore, if its GDP is impacted as a result of the untimely action, causing it to fall short of qualifying thresholds for its foreign funding, would that be overlooked by its critical debt holders?

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The Greece Iran Oil Connection

It’s a fair question for Greece to ask with its economic growth already under drag by the austerity demanded by the International Monetary Fund (IMF) and its European brothers. Greece sourced a significant 14% of its imported oil from Iran in the first half of 2011, and has sourced up to 23% of its oil imports from its ancient counterpart at times. According to a Bloomberg article quoting an anonymous Greek diplomat, Greece wants to ensure that if that oil is replaced, it will receive identical terms, which exclude financial guarantees.

Under normal circumstances, such a condition would not even be considered, but while Greece is under the economic microscope of the IMF, it wants to avoid new obstacles to reaching already challenging goals set by its lenders of last resort. Thus, last week, Greece held up the EU’s sanctions which would stop the flow of Iranian oil to the region. Agitated European officials have indicated that assurances will be made to Greece, but that the details will be worked out after this week’s agreement on sanctions is in place. It’s unclear whether such hastily made promises will be adequate for Greek politicians who cannot afford to place a single new burden on the shoulders of Greece’s aggravated populace.

Given Greece’s poor credibility, it is unlikely to find better terms on the open market than it gets from its likewise desperate Iranian trading partner. So, the question posed to Europe is, will it subsidize the difference in cost to Greece? Otherwise, some leeway must be given Greece, with regard to the steep economic goals it’s been forced to set.

What we are seeing in this latest situation is similar to the chaos that ensued when the former Greek Prime Minister proposed a referendum for the Greek people to decide for themselves whether their future would be with or without the euro currency. It shows that Europe is no stronger than its weakest link, and that the Greeks have more bargaining leverage than most understand. Finally, Greek politicians seem to be realizing that Europe needs Greece to stay solvent as much as Greece needs its financial assistance. Clearly, the most obvious concern to Europe is how a disorderly disposition of Greece would reel Portuguese, Spanish and Italian debt markets.

The current situation also highlights the important position Iran holds in the stability of the already shaky global marketplace. As the U.S. and Europe gear to pressure the Iranians, the question raised by Greece presents Iran with interesting information. Every plan to cut off Iranian oil is civil and arranged to ease the process, but the situation is not civil, if it is not economic warfare. So I have a question: What if the Iranians were to realize the plan set for them and understand their current position. They might just do the unexpected and cut off their own oil flow abruptly, and so, disruptively to Greece, Europe and the civilized world. Perhaps Greece’s negotiations with the EU in this regard should have been kept in closed quarters.

Editor's Note: This article should interest investors in National Bank of Greece (NYSE: NBG), Hellenic Telecommunications (NYSE: OTE), Coca-Cola HBC (NYSE: CCH), Teekay Corp. (NYSE: TK), Navios Maritime Holdings (NYSE: NM), Navios Maritime Acquisition (NYSE: NNA), Navios Maritime Partners L.P. (NYSE: NMM), Tsakos Energy Navigation Ltd. (NYSE: TNP), Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Excel Maritime Carriers (NYSE: EXM), Safe Bulkers (NYSE: SB), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Ship Finance Int'l (NYSE: SFL), Nordic American Tanker (NYSE: NAT), Seaspan (NYSE: SSW), General Maritime (NYSE: GMR), DHT Maritime (NYSE: DHT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), DryShips (Nasdaq: DRYS), Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), K-SEA Transportation Partners (NYSE: KSP), Euroseas (Nasdaq: ESEA), Star Bulk Carriers (Nasdaq: SBLK), Omega Navigation (Nasdaq: ONAV), Knightsbridge Tankers Ltd. (Nasdaq: VLCCF), TBS Int'l (Nasdaq: TBSI), Golar LNG (Nasdaq: GLNG), Claymore/Delta Global Shipping (Nasdaq: XSEAX), American Commercial Lines (Nasdaq: ACLI), Deutsche Bank (NYSE: DB), ITA (Nasdaq: ITUB), Banco Santander (NYSE: STD), Westpac Banking (NYSE: WBK), UBS (NYSE: UBS), Lloyd’s Banking Group (NYSE: LYG), Barclay’s (NYSE: BCS), Credit Suisse (NYSE: CS), Allied Irish Banks (NYSE: AIB), Banco Latinamerican (NYSE: BLX), Bank of America (NYSE: BAC), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), JP Morgan (NYSE: JPM), Morgan Stanley (NYSE: MS), European Equity Fund (NYSE: EEA), Vanguard European Stock Index (Nasdaq: VEURX), Powershares FTSE RAFI Europe (NYSE: PEF), Europe 2001 (NYSE: EKH), S&P Emerging Europe (NYSE: GUR), Ultrashort MSCI Europe (NYSE: EPV), Vanguard Europe Pacific (NYSE: VEA), Wisdomtree Europe SmallCap (NYSE: DFE), Wisdom Tree Europe Total Div (NYSE: DEB), iShares S&P Europe 350 (NYSE: IEV), Morgan Stanley Eastern Europe (NYSE: RNE), DWS Europe Equity A (Nasdaq: SERAX), DWS Europe Equity B (Nasdaq: SERBX), Fidelity Europe (Nasdaq: FEUFX), Fidelity Europe (Nasdaq: FIEUX), ICON Europe A (Nasdaq: IERAX), Pioneer Europe Fund (Nasdaq: PBEUX), ProFunds Europe 30 (Nasdaq: UEPIX), Putnam Europe A (Nasdaq: PEUGX), Rydex Europe 1.25x (Nasdaq: RYAEX).

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