Iran Signs First New Oil Sales Contract with Europe

Iran has signed its first oil sales contract with Europe following the lifting of sanctions against the country, with Hellenic Petroleum, the largest oil refinery in Greece. According to Bloomberg News, Hellenic Petroleum announced that it will immediately begin purchasing oil from Iran. This contract also includes an agreement to release financial resources belonging to the National Iranian Oil Company that had been frozen four years ago due to sanctions. The agreement to resume oil exports from Iran to Greece was reached after a meeting on Friday between Amir Hossein Zamani-Nia, Iran's Deputy Oil Minister, and Panos Skourletis, Greece's Minister of Energy, in Athens. Oil analysts believe that Iran will add 100,000 barrels per day to its supply one month after the lifting of sanctions, and four times that amount six months after sanctions are lifted. Iran claims it will immediately increase its oil exports by 500,000 barrels per day, while excess supply has driven oil prices to their lowest level in 12 years. Olivier Jacob, CEO of the Swiss consulting firm Petro Matrix, states that representatives from other European countries have traveled to Tehran; thus, such visits from traditional oil customers of Iran are also likely. According to the U.S. Energy Information Administration, before sanctions were imposed against Iran, Europe was the second-largest importer of Iranian oil, importing nearly 600,000 barrels per day from the country in 2011. Additionally, the International Energy Agency reported that Greece was the largest European importer of Iranian oil, importing about 120,000 barrels per day from Iran in 2011. On January 19, the International Energy Agency warned that the return of Iranian oil could push prices even lower as it would fill the gap left by reduced U.S. shale oil production in the market. Citigroup has predicted that the flow of Iranian oil to Europe could replace oil from Russia and Iraq. European oil companies, including Royal Dutch Shell, Eni, and Total, have expressed readiness to return to Iran and develop its oil fields, which hold the fourth-largest reserves in the world. On the other hand, Reuters, citing Iranian officials, states that refineries in Spain, Italy, France, and Greece are the most suitable options for purchasing oil from Iran. These countries were among the buyers of Iranian oil before sanctions were imposed. Since the imposition of sanctions in mid-2012, Iran's oil flow to Europe has been cut off, except for a few limited shipments that were sent to Italy due to commitments to contracts made before the sanctions. Roknoddin Javadi, CEO of the National Iranian Oil Company, states that some restrictions are preventing an increase in oil exports to 1.5 million barrels per day. Iranian oil officials have said they are seeking temporary legal solutions for selling oil. They emphasize that all excess oil will be sold in global markets within less than three months. For example, buyers can purchase crude oil and guarantee tanker insurance to the Iranian government. Brent crude oil was traded at over $30 per barrel on Friday, but oil prices have fallen by 20% this year and by more than 70% since June 2014.