Iran: EU oil ban review

A senior EU official said the Union may review in the next two months an embargo on Iranian oil imports that is scheduled to take effect from 1 July. The official, who has not been identified, told Reuters that for now there was no economic reason to change the ban. EU member states had agreed to review the embargo plan as early as this month because of concerns over its potential impact on global crude oil prices and the difficulty countries such as Greece face in finding alternative supplies.

But the review has now been postponed until May or June. 'So far, Greece has come back to us saying that for the time being they seem to be able to handle the situation,' the official said, speaking on condition of anonymity. 'They asked for the possibility of coming back to this in May or maybe June. The situation in oil markets is being kept under close review and, if necessary, we will come back to this.'

The official did not say whether the change to the review schedule was linked to ongoing talks with Tehran over its nuclear programme. Tehran expects EU oil sanctions to be removed if the next round of nuclear negotiations in Baghdad produces positive results. Petroleum Minister Rostam Qasemi went on the record that if the sanctions are not removed in the next round, Iran will stop selling oil to EU customers with immediate effect.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2012 Menas Associates

Iran cuts British, French exports

The Ministry of Petroleum confirmed on 19 February that Iran has cut oil exports to British and French firms in line with the decision to stop crude supplies to Europe. The stoppage came as no surprise to analysts, particularly after an earlier speculation that exports would be halted to six major European countries.

Ministry spokesperson Alireza Nikzad-Rahbar asserted, 'We have our own oil customers and replacements for these [British and French] companies have already been chosen and we will sell the crude oil to new customers.' This follows an earlier announcement by Petroleum Minister Rostam Qasemi that Iran was planning to cut oil exports to 'hostile European states' in an effort to pre-empt a EU embargo due to come into force in July. The minister also emphasised that Tehran had no intention of putting the European people under pressure during winter.

The move should be treated primarily as a media manoeuvre meant for domestic consumption. Britain and France are not the main consumers of Iranian oil and Iran will lose its clients in Europe within the next few months in any event.

The Majles earlier pushed for legislation to pre-empt the European Union's embargo in order to deprive European states of time to find substitute sources of oil, a move that would have affected the economically weak countries of southern Europe. But the Ministry is believed to have been against the move on the grounds that it would harm Iran more than Europe. It is not clear yet which countries will be Iran's new customers, amid signs that some non-Western customers, such as Japan and South Korea may also reduce their oil imports from Iran.

Qasemi's comments also contained a hint that things could soon get trickier. He noted that Iran had not yet resorted to barter deals in the face of difficulties over financial transactions, but 'if one day it is deemed necessary, it will not be a complicated issue.' But so far, he said, oil revenues have been transferred into the country by 'different ways' and 'numerous friends.'

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2012 Menas Associates

Iran: Buyback contracts needs revision

Addressing a meeting of local manufacturers and contractors Petroleum Minister Rostam Qasemi made several statements about Iran's oil industry. He noted that domestic buy-back contracts will be modified by adding some incentives to be attractive for local investors. He also indicated, 'If we intend to accelerate the development of joint oil and gas fields, the interest rate paid to domestic banks, manufacturers, contractors and even individuals (through offering rial-denominated bonds) should increase.'

Iran contractors face tough demands from domestic banks, he pointed out, including huge guarantees and 20 to 30 per cent interest rates; these demands jeopardise work timetables and the viability of projects. Each year more than $50 billion is needed to be invested in oil industry infrastructure. Some of these funds have been taken into account in the Ministry's budget but the rest, said Qasemi, should be provided through other channels such as selling bonds.

Petroleum Ministry plans to sell foreign exchange bonds, to increase energy funds at local banks, and to sell paper oil on bourse. The Ministry will also be able to take $20 billion from the National Development Fund (NDF). The funds could be lent with low interest rates to private sector and local manufacturers involved in oil industry activities.

In the meantime, NIOC managing director Ahmad Qalebani said that from 21 September 2011 new oil and gas contracts will be signed with new methods and formats that will make them more attractive for contractors and financial organisations.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2011 Menas Associates