NEWS,31.03.2012.

US to press on with Iran sanctions

President Barack Obama vowed today to forge ahead with tough sanctions on Iran, saying there was enough oil in the world market - including emergency stockpiles - to allow countries to cut Iranian imports.In his decision, required by a sanctions law he signed in December, Obama said increased production by some countries as well as "the existence of strategic reserves" helped him come to the conclusion that sanctions can advance."I will closely monitor this situation to assure that the market can continue to accommodate a reduction in purchases of petroleum and petroleum products from Iran," he said in a statement.Obama had been expected to press on with the sanctions to pressure Iran to curb its nuclear program, which the West suspects is a cover to develop atomic weapons but which Iran says is purely civilian.The overt mention of government-controlled stockpiles may further stoke speculation that major consumer nations are preparing to tap their emergency stores this year."I do think it was interesting that it was laid out there," said David Pumphrey, an analyst at the Center for Strategic and International Studies."It was sort of like a reminder that yes, this is part of the tool kit," said Pumphrey, a former Energy Department official.Oil markets remain tight, the White House said. Surging gasoline prices have become a major issue in the presidential election campaign."A series of production disruptions in South Sudan, Syria, Yemen, Nigeria, and the North Sea have removed oil from the market," the White House said in a statement.France is in talks with the United States and Britain on a possible release of strategic oil stocks to push fuel prices lower, French ministers said on Wednesday.Senior Obama administration officials told reporters that the United States views releasing emergency stocks as an option, but said no decision has been made on specific actions.Oil prices briefly rallied by about 70 cents on the announcement, but later reversed gains to end almost flat as traders turned mindful of the possible use of reserves."There's been a shift from focus on a threat (by Iran) to close the Strait of Hormuz to whether or not reserves are going to be released," said Dominick Caglioti, a broker at Frontier Trading Co. in New York.Going forward, Obama is required by law to determine every six months whether the price and supply of non-Iranian oil are sufficient to allow consumers to "significantly" cut their purchases from Iran.The law allows Obama, after June 28, to sanction foreign banks that carry out oil-related transactions with Iran's central bank and effectively cut them off from the US financial system."Today, we put on notice all nations that continue to import petroleum or petroleum products from Iran that they have three months to significantly reduce those purchases or risk the imposition of severe sanctions on their financial institutions," said Senator Robert Menendez, co-author of the sanctions law.Obama can offer exemptions to countries that show they have "significantly" cut their purchases from Iran, and recently exempted Japan and 10 EU countries from the sanctions.A senior administration official told reporters that talks continue with China, India, South Korea and other importers."Each day I think really we see a number of positive indicators from a broad range of countries," the official said, citing an announcement by Turkey today that it would cut imports of oil from Iran by 10% as an example.Obama faces a delicate balancing act on Iran, leading up to November US general election. On the one hand, he must show voters he is being tough on the Islamic state.But with oil and gasoline prices surging in response to geopolitical risks, he must also avoid steps that would unduly rattle oil markets. That could threaten the global economy and hurt voters already angered by the rising cost of fuel.Obama also faces pressure from some lawmakers in Congress who want to make sanctions on Iran even tighter. The House of Representatives has already passed additional sanctions, and a bill is pending in the Senate.Senior administration officials briefing reporters declined comment on the proposed new sanctions."We welcome the president's determination and applaud the administration's faithful implementation of the Menendez-Kirk amendment," said a spokesman for Senator Mark Kirk, a Republican who has pushed for additional measures."To build on this momentum, we hope the Senate will consider amendments to the pending Iran sanctions bill that would continue to increase the economic pressure on the Iranian regime," Kirk's spokesman said.

Spain announces deep cuts amid public protest

Spain has announced deep cuts to its central government budget as it battles to convince European partners and debt markets it can rein in its budget deficit in the face of growing complaints from the public.The government said it would make savings of 27 billion euros for the rest of 2012 from the central government budget, equivalent to around 2.5% of gross domestic product. The figure includes tax rises and spending cuts of around 15 billion euros announced in December.The cuts come despite popular resistance - a general strike on Thursday disrupted transport, halted industry and saw some minor violence - and against a grim economic backdrop; Spain is thought to have fallen back into recession in the first quarter and has the highest unemployment rate in the European Union."Everyone knows the difficult problem we face in this country, and it calls for special efforts in fiscal consolidation and structural reforms to grow and create employment," Deputy Prime Minister Soraya Saenz de Santamaria said after the weekly cabinet meeting.The centre-right government, which swept to power in November with the largest parliamentary majority in 30 years, has already passed labour market and banking sector reforms that it says can improve competitiveness and reduce wage costs.EU partners have agreed to let Prime Minister Mariano Rajoy aim for a total 2012 deficit at 5.3% of gross domestic product, a less demanding goal than the 4.4% originally suggested but substantially less than last year's 8.5%.Speaking in Copenhagen after an EU ministerial meeting, Spanish Economy Minister Luis de Guindos said the measures would be implemented as soon as possible, adding that any suggestions that Madrid needed emergency international funds was "absurd".Spain is trying to assure its EU partners that it is in control of slashing its deficit and to avoid needing a bailout package like that of smaller neighbour Portugal."What comforts markets are domestic policies. If we don't do what is needed, then there will be no rescue fund that is big enough," de Guindos said. Finance ministers agreed on Friday to increase a financial firewall to 700 billion euros to ward off fears the euro zone debt crisis could spill over to Spain or Italy, much larger economies than those bailed out previously.The Spanish government said it was aiming for a central government deficit equivalent of 3.5% of GDP, a deficit of 1.5% of GDP coming from Spain's regions and a balanced social security budget. Smaller local authorities expect a deficit equivalent to 0.3% of GDP.The regions announced a deficit of 2.9% of GDP in 2011, meaning they would have to cut around 15 billion euros to meet the 2012 target.Details were scarce, with the government due to set the budget before parliament on Tuesday, but some economists are concerned that deep austerity measures could hurt already weakened growth and further endanger the deficit targets.The government said it would slash spending by 16.9% across the ministries, with spending at the Foreign Ministry cut by more than half, and the Industry, Energy and Tourism Ministry taking a cut of more than 30%.Total cuts of over 42 billion euros, between the central administrations and the regional authorities, could be tough for an economy struggling to grow, economists warn."This is as austere as it gets. It's a tightening of fiscal policy until the pips squeak. There can be no doubting the government's willingness to curb Spain's excessive budget deficits," said Nicholas Spiro at Spiro Sovereign Strategy.Rajoy can ill afford to upset nervous bond market investors, who pushed the yield premium for Spanish 10-year debt on Thursday close to their highest levels since early January.The premium investors demand to hold Spanish over German debt dipped slightly after the budget announcement to around 356 basis points, suggesting a cautious welcome for the plan intended to improve Madrid's ability to service its debt.Investors fear, however, that the government may fail to deliver the budget cuts it is promising or will need to announce new measures before the end of the year which could hurt growth."I suspect that the government could be forced to implement further austerity measures later this year, with lingering economic downturn set to place additional strains on an already perilous budget deficit reduction plan," said IHS Global Insight economist Raj Badiani. "The main risk is that the government's tax revenue projections for 2012 look too optimistic."