Iran Sells Oil by 'Circumventing Economic Sanctions'

Iran sells hundreds of thousands of tons of refined oil each month by circumventing Western sanctions. Sources familiar with oil transactions in the region told Reuters that Iran conducts these transactions through companies based in the United Arab Emirates, a close ally of the United States. According to U.S. and EU sanctions aimed at halting Iran's nuclear program, which began in 2012, the export, purchase, and transfer of Iranian oil products are prohibited. The U.S. has also asked its allies worldwide to refrain from transferring Iranian oil products. Several commercial sources in the Middle East stated that the Iranian government has managed to bypass the restrictions imposed by the sanctions through unconventional methods. These methods include turning off tracking systems on oil tankers, transferring oil from one ship to another, unloading and loading in remote ports, mixing Iranian products with oil from other countries to change chemical specifications, and manipulating shipping documents to sell them with Iraqi paperwork. The sources added that Iranian refined oil is primarily supplied from the port and fueling base in Fujairah, UAE, and is offered to buyers who may be unaware of the Iranian origin of the cargo through intermediary companies. These intermediaries are small firms that buy products at below-market prices for higher profit margins, while larger companies are unwilling to risk their positions in international markets by violating U.S. regulations. Reuters reports that officials from the National Iranian Oil Company and Fujairah port authorities have not responded to its inquiries on this matter. The Western sanctions, which have halved Iran's oil exports and primary source of revenue, have severely impacted the Islamic Republic's economy. Iran, which has now increased its exports to about one million barrels per day, is seeking ways to boost its exports. The drop in oil prices and sanctions have led Iran to ease its conditions for building oil facilities to encourage foreign investment. Iran uses oil to generate electricity and fuel its ships, but unlike other oil products such as gasoline and diesel, it has a surplus of crude oil production. Energy trade sources estimate Iran's refined oil exports in recent months to be between 200,000 to 400,000 tons per month. Iran's exports in 2011, before sanctions, were 600,000 to 650,000 tons per month. Statistics show that Iran's oil exports were 200,000 tons in October, 400,000 tons in September, and 540,000 tons in June of last year. The risk of targeted sanctions against marine transport insurance companies and financial institutions for buying or transporting Iranian oil complicates potential customers' dealings with Iran. However, one commercial source stated that oil transfers from Iran to the UAE are still ongoing, adding, 'Iranian oil has always been present in the UAE market, and everyone knows this. People buy oil from Iran and export gasoline back to Iran.' Hagar Chamali, a spokesperson for the U.S. Treasury Department, stated, 'We do not comment on specific cases. However, we are vigorously pursuing investigations into sanctions violations through cooperation with officials from other countries.' She added, 'We work closely with UAE officials to maintain and enforce sanctions against Iran, and if we have concerns, we communicate them to them.' In 2012, the U.S. blacklisted several companies, including the UAE's Falcon Oil and Singapore's QOIL, for dealing with Iran. Last August, the U.S. added two companies and three other individuals to this list, stating they sold oil on behalf of Iran and attempted to conceal Iranian gas exports. One analysis from Reuters' oil research and outlook section noted that Iran's oil exports were halted for two to three months this fall due to increased domestic demand but resumed in January. Data from this research indicates that due to increased oil transfers from Iran to the Fujairah fueling base, oil exports from the UAE to Asia reached 480,000 tons in February. This amount is higher than the volume recorded in November and significantly more than the 358,000 tons during the same period last year.