An early winner from the last round of Iranian sanctions arises: Russia.The United States began to implement a tough new…
An early winner from the last round of Iranian sanctions arises: Russia.
The United States began to implement a tough new slate of economic restrictions on Iran on Monday, including a threat to sanctions for buyers of Iranian crude oil. It has refineries in Europe and Asia recently, major buyers of Iran’s oil looking for alternative deliveries. Russian oil companies have stepped in and steal customers from Iran. The two countries produce similar commodities, making a change of refineries relatively easy.
But Moscow also offers Tehran an armor for its strict crude oil. It says it plans to defy US sanctions and buy Iranian imports. It offers to pay only in the form of barter, and then process crude oil for household use. It would release its own oil for more lucrative raw export markets.
“Russia is in all directions,” says Helima Croft, Strategic Strategist at Canadian Real Estate RBC.
Russia counts Iran as an important ally in its widespread geopolitical role in post-civil war Syria. It has criticized the new round of US sanctions and says it will not be bound by them. Moscow has said in recent months it would buy at least 1
00,000 barrels per day of Iranian oil, which would provide a welcome buyer for oil who may not find anyone else. Russia offers to pay for crude oil with Russian machinery and food, according to Russia’s oil ministry. It is also promising to invest in the Iranian oil sector when Western companies return.
KHAMENEI.IR / AGENCE FRANCE-PRESSE / GETTY PHOTOS
The new Washington-imposed sanctions are specifically aimed at Iranian oil production, the country’s most important economic pillar. US officials want to cull up 2.2 million barrels a day with Iranian raw export capacity, which threatens buyers with sanctions. Many buyers, because they use the US banking system, are vulnerable to such penalties and are already taking back. Russia is less vulnerable to Washington’s retribution, as it is already under US sanctions and its economy and financial systems are less tied to the United States than Western European countries.
Iran’s exports had dropped about 800,000 barrels a day before the United States announced its new set of sanctions. Oil market actors expect it to fall sharply now when sanctions are in place.
At the same time, it is promising to help Iran, Russia exchange Tehran on the global oil market. It has increased its production by nearly half a million barrels a day compared to last year, which recently hit a 30-year production record. Russia, the world’s largest oil producer, pumped 11.41 million barrels a day in October, an increase of 4.3% compared with the same period last year.
Some of the new raw materials are broken by former customers in Iran.
This is especially the case in Europe, where buyers have suddenly stopped Iranian purchases because they tend to be more exposed to the US business and finance system.
For European refineries, Russian oil is a natural replacement for Iranian raw materials, as it tends to be of medium density and relatively high sulfur levels can typically be shipped faster to their plants than other replacement pipes. Italian refineries
For example, SpA loses more of Russia’s oil, especially its popular Urals class, to compensate for Iranian oil, according to people familiar with the issue. Eni and Saras spokesmen did not return comments.
“The Uralians [grade] will benefit” Patrick Pouyanne, Managing Director of
told a London Energy Conference last month.
Total stopped buying Iranian raw in July, the company said. The following month, it bought 217,000 barrels a day of Russian crude oil for its Le Havre refinery in France, an annual high, according to data from freight trainer Kpler.
Russia also exchanges Iranian raw materials for customers outside the European Union. Turkey resumed imports of Russian oil in June after a three-month absence, which means that the cuts in Iran’s oil purchases are conducted according to official statistics. Turkey has promised to defy US sanctions as well, but many of its companies have deep international links and would be exposed to US sanctions.
It already translates into higher profits for Moscow’s state energy company. On Tuesday, Rosneft reported a triple jump in net income to $ 451 billion (6.8 billion dollars) for the first nine months of 2018 compared with the same period last year, mainly due to production and higher prices at Urals.  The same compensation effect occurred in China, which reduced oil production from Iran by 34% in September the year before, while Russian sales increased by 7%.
In Korea, Tehran’s oil bills fell in August and fall 85% on an annual basis. Russian transports were reduced by 20% the same month, according to South Korean customs duties.
-Anatoly Kurmanayev and Ann Simmons contributed to this article.
Write to Benoit Faucon at [email protected]