China firms selling fuel to Iran as US sanctions loom

BEIJING/LONDON: State-run Chinese companies are selling gasoline to Iran, a move that could undermine US pressure on Tehran to give up its nuclear programme, traders and a newspaper report said on Wednesday.

The US and its allies may use sanctions to target Iran’s dependency on fuel imports if it refuses to freeze its nuclear programme, which the West suspects is aimed at making nuclear weapons. Iran insists its ambition is to generate electricity.

EU’s foreign policy chief Javier Solana said on Tuesday he did not expect Russia and China would oppose Western powers if they call for new sanctions on Iran.

Chinese firms have stepped into a vacuum left by sellers who have halted supplies in anticipation of new sanctions.

The trade is further evidence of the growing energy ties that bind energy-hungry China, the world’s No. 2 crude oil consumer, and Iran, which holds the world’s second-largest crude oil reserves and desperately needs investment to develop them. Tehran has turned to Asian firms for energy investment, as Western firms succumb to political pressure to stay away.

“The Chinese simply don’t have a problem dealing with Iran,” said one oil trader in the Gulf. “They’re not worried about political pressure, they’ve been doing this for a long time. They’re not worried about exposure to US sanctions. More Chinese companies are keen to get involved.”

State-run Chinese firm Zhuhai Zhenrong Corp, the world’s largest Iranian crude buyer by company, has been shipping a cargo or two each month to Iran for at least a year, two trade sources familiar with the company told Reuters.

Indian refiner Reliance and oil major BP are among gasoline suppliers that have shipped nothing to Iran for months, traders said.

Other fuel suppliers have continued to sell fuel into Iran, even those based in the countries of US allies in Western Europe. Only US firms are banned from selling fuel to Iran under existing sanctions.

The trading arms of Anglo-Dutch major Royal Dutch Shell and France’s Total have sold gasoline cargoes into Iran for October delivery, traders said on Wednesday.

A Total spokeswoman declined to comment on Wednesday. A Shell spokeswoman was unavailable for immediate comment.

Other regular suppliers to Iran are Europe-based trading firms Vitol, Trafigura, Glencore, Russia’s LUKOIL and Malaysia’s state oil company Petronas, oil traders said.

Iran is the world’s fifth-largest oil exporter but lacks the refining capacity to meet domestic fuel demand, forcing it to import up to 40 percent of its gasoline needs.

It also plans to start importing diesel this month to burn in power plants to meet rising power demand for heating as the weather turns colder.

Intermediaries: The Financial Times, citing traders and bankers familiar with Iran’s purchasing, reported on Wednesday that China supplies Iran through intermediaries. Oil sources contacted by Reuters said Chinese trading companies were buying gasoline cargoes in international markets to sell to Iran.

“We estimate, based on what we are hearing in the market, that 30,000-40,000 barrels a day of Chinese petrol is making its way from the Asian spot market to Iran via third parties,” the newspaper quoted Lawrence Eagles, head of commodities research at JPMorgan, as saying.

Traders at both Sinopec Corp and PetroChina, China’s dominant oil refiners and trading firms, told Reuters that they were not selling any gasoline to Iran.

“We used to be a regular, direct supplier to Iran back in between 2001 and 2004, when we had lots of surplus barrels for export and there were no credit/embargo problems as we are having now,” said a Sinopec trader.

Official customs data issued on Tuesday showed none of China’s gasoline exports this year have been shipped directly to Iran, although overall sales have surged. Nearly half its gasoline is shipped to Singapore, Asia’s main trading and storage hub, much of which is likely then sold on.

Iran has repeatedly shrugged off the impact of any new sanctions on its fuel supply, and officials have said they would always find suppliers. reuters

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