G8 raises pressure on Iran with oil commitment

Leaders of the Group of Eight major economies raised the pressure on Iran on Saturday, committing to a common approach on its nuclear program and indicating they would be ready to act together to lower oil prices if necessary.

"All of us are firmly committed to continuing with the approach of sanctions and pressure in combination with diplomatic discussions," U.S. President Barack Obama told reporters at the G8 meeting at the presidential retreat in Camp David.

"And our hope is that we can resolve this issue in a peaceful fashion that respects Iran's sovereignty and its rights in the international community, but also recognizes its responsibilities," he said.

The Camp David summit comes days before the next round of Iran talks, to be held in Baghdad. Western countries suspect Iran's nuclear program is aimed at making a nuclear bomb, a charge Tehran denies. The U.N. nuclear chief is also due to fly to Tehran on Sunday in an apparent bid to secure a deal enabling his inspectors to probe suspicions of atomic bomb research.

Speculation has been growing that Obama would use an energy session at the G8 to seek support to tap emergency oil reserves before a European Union embargo of Iranian crude takes effect in July and tough new U.S. sanctions come into force in late June.

Sources familiar with a draft communique said the leaders agreed to call on the International Energy Agency - the agency responsible for coordinating the industrialized world's emergency oil stocks - to take "appropriate action" if there are further disruptions to the oil market in the coming months.

"There have been increasing disruptions in the supply of oil to the global market over the past several months, which pose a substantial risk to global economic growth. In response, major producers have increased their output while drawing prudently on excess capacity," the statement will say, according to the sources.

"Looking ahead to the likelihood of further disruptions in oil sales and the expected increased demand over the coming months, we are monitoring the situation closely and stand ready to call upon the International Energy Agency to take appropriate action to ensure that the market is fully and timely supplied," it says.
The statement makes no explicit mention of releasing strategic oil reserves.

With oil prices already sliding, a move by Obama to tap the Strategic Petroleum Reserve - alone or along with other countries - could expose him to criticism that the emergency reserve should only be touched in a supply crisis.

Even without a hard and fast commitment to intervene in the oil market, the G8 statement will show that this month's slump in oil prices has not deterred Obama from moving toward tapping the reserve again - an unprecedented second release for a U.S. president.

Tapping the reserves is not a foregone conclusion. It is unclear yet whether Obama and allies would opt to wait and see if Iran's exports fall and prices spike, or move preemptively to head off a speculative panic that could drive U.S. gasoline quickly above $4 a gallon.

U.S. crude oil has tumbled 12 percent this month, dropping to the lowest since before a November U.N. report on Iran's atomic program which kindled global fears.

Source: REUTERS