Monday, September 17, 2012

U.S. tightens screws on Iran oil exports, banking

U.S. tightens screws on Iran oil exports, banking

December 1st 2011

Dubai, United Arab Emirates — Iran faces new hurdles to getting paid for its oil as the United States tightens financial sanctions to deter buyers from the world’s third-largest crude exporter.

The United States approved extra curbs on Iran’s banking system and oil industry on Nov. 21, hoping to thwart the country’s nuclear program, and the European Union may follow. Current sanctions have led Indian importers to route payments for Iranian crude through a Turkish bank. These refiners, concerned Turkey may stop cooperating amid the latest U.S. rules, are asking banks in Russia to arrange alternatives, said three people with direct knowledge of the situation.

“The idea of the sanctions is to shrink the circle of buyers and so increase their ability to extract discounts from Iran,” said Robin Mills, an analyst at Dubai-based Manaar Energy Consulting, who worked for a decade at Royal Dutch Shell in the Middle East.

The United States is stepping up pressure after a Nov. 8 report from the United Nations’ International Atomic Energy Agency concluded that Iran was working on a nuclear weapons program. At stake is crude supply from the OPEC nation, whose exports last year were exceeded only by those of Saudi Arabia and Russia. Oil is Iran’s main source of income, earning it $56 billion in the first seven months of 2011, according to Energy Department estimates.

The country pumped 3.6 million barrels a day last month, a Bloomberg survey showed, and exported an average 2.58 million barrels a day in 2010, according to Organization of Petroleum Exporting Countries statistics.

France has proposed that the EU ban Iranian oil, French Budget Minister Valerie Pecresse said Nov. 23. Iran is already subject to some U.N. and EU sanctions.

“The latest measures will make it even harder for people to finance trade with Iran,” said Nick Grandage, a London-based partner at the law firm Norton Rose who specializes in trade finance. Sanctions have stifled trading of Iran’s oil in London, Europe’s financial hub, and may have forced importers to pay for crude in non-dollar currencies, he said.

Should Europe adopt more formal restrictions on Iranian crude, the Persian Gulf nation would likely be forced to offer oil more cheaply to refiners in Asia, its biggest market, Olivier Jakob, managing director at Oberwil, Switzerland-based Petromatrix, said in a Monday note to investors.

By targeting financial transactions and stopping short of sanctioning international trade in Iranian oil, the United States aims to pressure Iran without risking a surge in crude prices at a time of global economic fragility, said Mills.

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