Oil dries up and dollars freeze

Press, 27 November 1979, Page 16

Oil dries up and dollars freeze

From the “Economist,” London

Officials at the Department of Energy and spokesmen for the oil industry in the United States have both played down the immediate effects of the embargo against Iranian oil imports. This was partly aimed at American opinion. The action met almost unanimous support. The Administration is not following up the announcement with efforts to get American multi-national oil companies to suspend trade in Iranian oil for their foreign operations. The heaviest American users of Iranian crude and refined oil are two independents, Amerada Hess and Ashland Oil. It is likely that the major oil companies will be asked to make up some

at least of these two companies’ supplies from other sources. The United States was importing about 700,000 barrels of Iranian oil a day — about 4] per cent of consumption, 91 per cent of imports. Much of that could be made up, if at a higher price. This should be an opportunity, the Administration hopes, to get Americans to use less oil. The time is never right. Much of Amerada Hess’s Iranian oil went, through the Virgin Islands, to New England, which is worried about winter heating oil. Mr Carter’s action to freeze Iranian assets was taken under the International Emergency Economic Powers and National

Emergencies Acts. Similar action has been taken against North Korea, Cuba and Vietnam, but the sums involved in Iran’s case make this an act of an entirely different order. Assets frozen, which include Iranian official deposits in American banks abroad as well as other official Iranian assets in this country, amount to about $5 billion, according to the Treasury. Although the immediate effect on financial markets was not large, the possible effects could be far-reaching. There were questions to which the treasury, on the spur of the moment, had few ready answers. The order appears to apply to foreign banks on American soil, so German, French and British banks in the United States are ex-

pected to comply. American banks overseas are caught, too. The coverage of American law is being stretched thin but will it be challenged? American banks have lent about $2 billion to Iran. It was partly in anticipation of possible default that the American step was taken. American banks, according to Mr Walter Wristen, the chairman of Citibank, will settb debts owed by Iranian Government bodies before putting the balance into blocked accounts. There was, accordingly, little fear of bank collapses following non-payment of Iranian debts. One result of the speed of the final decision is that a number of friendly governments could not be consulted in time and had to be satisfied with notification.