"Some have announced that they will sanction petrol to Iran. This cannot be done."
The nuclear issue in Iran has long included the threat of US sanctions on non-US companies supplying gasoline and other refined products to Iran; US companies already are banned from such activity.
Ahmadinejad is clearly not shaking empty fists into the air, going by Iran's heavy buying of gasoline in recent months.
Iran has been consistently buying a total of 13 to 15 medium-ranged cargoes, each 35,000 mt in size, every month. And this has been going on well after proposals in the US for tougher sanctions against oil companies dealing with Iran. Since then, there has been little or no impact heard on Iran's trade flows.
Even with the recently-announced deal to import gasoline from Venezuela as part of a package of trade exchanges between the two countries, Iran will still need to import gasoline until its refinery upgrades are completed in two years.
This is because the Venezuelan supply, if and when it happens in early-October, is equivalent to two MR-sized cargoes each month -- well below what Iran is buying from the spot market.
What this means is that Iran will still need to run into the spot market to cover its import requirements. For now, it doesn't appear to have any problems doing so, given current market fundamentals.
New major gasoline production capacity that has come on-line recently in India, Saudi Arabia and (soon) from the United Arab Emirates has left the Middle Eastern gasoline market short on big buyers and long on competitive supply. Indian refining giant Reliance now has the capacity to export the equivalent of one cargo each day.
Reliance has avoided flooding the market by raising the share of its cleaner, non-oxygenated gasoline that can be delivered to its own storage in the US and the Caribbean, and at the same time displacing European and Mediterranean cargoes that otherwise might go into the US.
And this has a knock-down effect in the Middle East, as the displaced Mediterranean and European barrels will need to go further afield into the Middle East to find homes. Even if demand growth rates recover next year on rosier economic prospects, let's face it: there's still a lot of gasoline moving around.
The Iranians know this too. They have been paying market levels for their gasoline, with no sign of a risk premium that sellers might otherwise seek for conducting business with a country that has at least semi-pariah status.
Even if companies such as Reliance or Glencore shy away from supplying Iran because of the potential impact sanctions might have on their own US business, there are plenty of other trading houses ready to step into their shoes. So in the end, the only things impacting Iran's pace of buying are the same things that always has driven it: domestic demand and price levels. Nuclear disarmament or not, sanctions or no sanctions, the Iranians are still moving along and buying their gasoline.
