Iran braces for further sanctions pressure on oil exports


By Margaret McQuaile in London


February 11, 2013 - Western oil sanctions directly targeting Iran's oil revenues have already slashed the country's crude exports to its main customers in Asia by close to 400,000 b/d between 2011 and 2012, and volumes look set to fall further as new US restrictions combine with existing measures to put further pressure on Tehran's ability to find markets for its crude.


The new US measures build on the existing regime of punitive measures, in force since June 28 last year, which allows a country to continue to buy Iranian oil only by pledging staged reductions in purchases every six months.


From February 6, those countries which have been granted waivers will avoid sanctions risk only if they make payment for oil into an account at a bank within their borders.

These payments cannot be transferred to Iran but must remain within the respective countries. Nor can they be used for third-party transactions.


This means that, because most buyers of Iranian crude run a deficit with Iran, the Iranians will have their oil revenues blocked in overseas accounts that can be used only for trade with that country.


US officials said on February 6 that countries granted waivers from the earlier banking sanctions had indicated that they would comply with the new, tougher sanctions.


Tehran's main option for reducing the impact of the new measures appears to be a switch to barter deals with its buyers, a move already being considered by Iran, whose industry ministry has set up a special barter committee made up of Iranian businessmen and banking experts.


In early January, the rapporteur of Iran's parliament said the country's oil exports had already declined by 40% in the year to March 2013.


Before the oil sanctions, Iran had been exporting as much as 2.2 million b/d including some 500,000-600,000 b/d to the European Union.


The EU embargo on imports of Iranian oil was agreed in January 2012. By the time it came into force on July 1 few European countries were importing Iranian oil.


But the EU sanctions have also had an impact beyond Europe, thanks to the ban on the provision of EU-linked insurance cover for any shipments of Iranian oil, regardless of destination.


As a result, the Japanese government has had to step in to provide state-linked cover for refiners importing Iranian oil, while South Korean buyers have accepted Iran's offer to deliver crude on Iranian vessels.


The insurance issue has prompted new concerns in India, where insurance companies are worried about extending full cover for refineries which process Iranian crude.


One refining source in India said a company that had recently renewed cover for a plant included a clause making it "subject to sanctions" but without referring to any specific sanctions provision.


But while Indian refiners are pondering the implications of processing Iranian crude, Japanese shipowners have been able to remove a big question mark over whether they can use in their oil tankers bunker fuel that may have been blended with Iranian oil.


The Japan Ship Owners' Mutual Protection and Indemnity Association, or the Japan P&I Club, had warned last year that members could lose their reinsurance cover from EU insurers if they used bunker fuel produced from Iranian crude even if the cargoes being transported were not Iranian.


However, in a special circular issued on February 1, the Club told its members that the use of bunker fuel produced from Iranian oil was understood to be allowed under the EU sanctions regime.


Meanwhile, as its markets shrink in Asia, Iran is seeing other exporters, including several fellow members of the OPEC oil cartel, boost their presence in the growth markets of the Far East.


A glance at China's crude import table, for example, shows that while imports from Iran fell by nearly 21% last year from 2011 levels, imports rose by 7.1% overall and by 28.4% from Angola, by 13.4% from Iraq, by 32.5% from Venezuela and by 29.6% from the UAE.


Non-OPEC Russia boosted its crude exports to China by 31.3% year on year.


Japan's import table tells a similar story, with crude imports rising by 2.7% overall year on year but with volumes from Iran falling by 39.5% in 2012 from 2011 levels.

 

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