After months of Europe – prodded in part by Washington – gradually increasing the pressure on Iran, tensions have dramatically escalated in recent days. On Tuesday, hard-line Iranian protesters upset about Britain's latest sanctions against Iran's central bank attacked the British Embassy in Tehran. In response, Britain shut the embassy and expelled Iranian diplomats from its soil.
If other European countries choose to downgrade diplomatic ties, or decide to tighten financial sanctions against Iran's central bank, the impact on Iran's economy and currency would be significant. Already, France, Germany, and the Netherlands have pulled their ambassadors out of Iran for “consultations.”
Oil officials in Tehran say they will look to refineries in Asia if heightened financial sanctions or political pressure from the US reduce purchases of Iranian oil by European customers. Iran, which provided 5.8 percent of EU oil imports in 2010, is the EU's fifth supplier of oil after Russia, Norway, Libya, and Saudi Arabia.