DUBAI/GENEVA: Iran is becoming increasingly creative in dodging Western sanctions, managing to sell a rising volume of fuel oil to generate revenue equal to up to a third of its crude exports, which have been badly hit by restrictions.
Compared with the first half of the year, Iran has on average exported more fuel oil per month since July, when European Union oil and shipping insurance sanctions came into effect and more than halved its crude exports.
EU sanctions prohibit the import, purchase and transport of Iranian petroleum products in an attempt to curb revenues that might be channelled into a nuclear programme that Iran says is for peaceful purposes but the West fears is to enable it to make weapons.
Even for companies with no link to the EU, sanctions on financing and shipping insurance discourage would-be customers. Iran uses fuel oil for electricity generation and to power ships, but unlike other more valuable refined products such as diesel or gasoline, it has a surplus to export from the 70,000 tonnes a day it produces.
The July sanctions slashed the Opec member’s fuel oil sales initially, traders and analysts say, as term customers cancelled contracts, but sales have since rebounded thanks to the innovative methods of Gulf-based middlemen and Iran’s market-savvy oil officials.
The Islamic Republic sold an average 648,000 tonnes of fuel oil monthly from July to October, up from 636,000 tonnes for January to June, according to data from a company that tracks Iran’s oil shipments.
That brought in an average of $410m per month. August income was more than double that figure, helping Iran to recoup a portion of the $3.8bn it has lost in monthly crude export revenues since July. Salar Moradi, oil analyst at FACTS Global Energy, said Iran fuel oil exports have risen from lows of around 400,000 tonnes a month this summer.
“The National Iranian Oil Company has been very successful in finding new strategies to circumvent sanctions and sold its fuel oil to Asia in August and September. Now we think Middle Eastern buyers of Iranian fuel oil have reappeared,” he said.
Using ship-to-ship transfers, discharging and loading at remote ports and blending the Iranian fuel oil with other fuels to disguise the origin have become popular tactics for the Gulf-based middlemen and helped keep sales steady, several trading sources familiar with the region said.
Data from the firm tracking Iran shipments showed sharp fluctuations in fuel oil flows, which sources said could be attributed to shipping delays and tanker availability. Exports dived to zero in July and then jumped to 1.389 million tonnes in August, with a third of the sales going to the Middle East. Iran’s fuel oil exports stayed above 1.1 million tonnes in September, and the Middle East received nearly 900,000 tonnes of this. In October, exports plunged to about 35,000 tonnes.
Reuters data for Iranian fuel oil flows to East Asia showed a new record of around 1.4 million tonnes in September and 1.1 million tonnes in October. Requests for comment from officials at the NIOC were not answered.
Several Middle Eastern traders said they had been approached by small UAE-based companies offering a type of fuel oil dubbed in the market as “Iraqi special blend” that included a combination of different fuel oil blends from the Middle East, or with an origin described as Iraqi.
Reuters
