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China paying euros for Iranian oil

BEIJING: Iran is pressuring its oil customers to start paying in currencies other than US dollars and many have begun to comply, oil executives here say.

China’s state-run Zhuhai Zhenrong Trading, the biggest buyer of Iranian crude worldwide, began paying for its oil in euros late last year as Tehran moved to diversify its foreign reserves away from US dollars.

The Chinese firm, which buys more than a tenth of exports from the world’s fourth-largest crude producer, has changed the payment currency for the bulk of its contract of roughly 240,000 barrels per day, Beijing sources said. “Most of China’s purchases have shifted to euro. It’s not difficult so long as our banks can handle that,” said a Chinese state oil trader.

Japanese refiners, who buy about 500,000 barrels per day of Iranian crude, nearly a quarter of Iran’s 2.2-million-barrel daily shipments, continue to pay in dollars but are willing to shift to yen if asked, industry sources and officials said separately.

Iranian officials have said for months that more than half their customers have switched their payment currency away from the dollar as Tehran seeks to diversify its reserves, but news of the Zhenrong change is the first outside confirmation. The price of Iranian oil is still quoted in dollars.

The shift, being watched closely by foreign exchange traders, comes amid an extended dispute between Tehran and Washington over Iran’s nuclear program. China, which depends on Iran for about 12 percent of its imported crude oil, has at times used the threat of its United Nations veto to blunt Western measures.

The UN Security Council imposed new sanctions on Iran on Saturday as Tehran refused to halt its nuclear program, targeting arms exports and 28 Iranian individuals and entities.

Iran’s central banker said Tuesday that Tehran had cut its holdings of dollar assets to a minimum level of about one-fifth of its foreign reserves in response to US hostility.

Hojjatollah Ghanimifard, head of international affairs at National Iranian Oil, said last week that about 60 percent of Iran’s oil income was in non-dollar currencies as almost all of its European clients and some of its Asian customers had agreed to make non-dollar payments. Iran is China’s third-largest crude supplier with daily volume of 335,000 barrels last year. Sinopec, Asia’s top refiner, is still paying in US dollars, said a Sinopec trader.

Japanese buyers, including the country’s top refiner, Nippon Oil , said they had all received informal encouragement from Iran to pay on non-dollar terms, but were awaiting an official request. “We are looking at it so that we can switch the currencies any time, but we have not gotten any official requests from them. We are doing the transactions in dollars,” Nippon Oil chairman Fukuaki Watari told reporters last week. reuters

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