Reuters: Possibility of Reduced European Oil Imports from Iran

Following the recent decision by the United States to impose new sanctions against Iran, some reports indicate that European oil companies do not rule out the possibility of reducing their oil imports from Iran. According to a recent report from Reuters published on Friday, May 10, European companies importing oil from Iran say that banking issues may hinder their trade with Iran. At the same time, these companies state that they do not intend to immediately and hastily reduce their oil imports from Iran. Last week, the U.S. government announced its withdrawal from the nuclear deal with the Islamic Republic and announced the reinstatement of 'severe' U.S. sanctions against Iran. Iran produces about 4% of the world's oil and exports approximately 450,000 barrels of crude oil to Europe daily. According to Reuters, many analysts predict that Iran's oil exports will decline due to the new sanctions, and oil prices will rise. Rainer Seele, the CEO of the Austrian oil and gas company OMV, told the German newspaper Handelsblatt on Friday, 'It is still unclear what tangible sanctions the United States will impose on Iran, but it is expected that the price of North Sea Brent oil will approach not $70 but rather $80 per barrel.' On the same day, Jefferies, an American investment bank, published a note stating that Iran's crude oil exports are expected to begin declining in the coming months. The note stated, 'Our prediction is that by around October, Iran's oil exports will decrease by 500,000 barrels per day and will then face a decline of one million barrels per day.' Continuing current imports from Iran; the problem of banking sanctions. According to Reuters, companies in Europe said on Friday that they are still importing oil from Iran. Marta Lorente, a spokesperson for the Spanish oil company Repsol, one of Iran's European customers, told Reuters, 'Currently, our business activities are as before.' However, she added, 'We fully comply with EU regulations and international laws, and we will carefully adhere to any trade restrictions that may arise as a result of any potential international sanctions.' An official from another European customer of Iran, the Italian company Eni, told the news agency that this company currently purchases two million barrels of crude oil from Iran each month, and this is done under a contract that will continue until the end of the year. This unnamed official added that the impact of any new sanctions would be felt after six months. Meanwhile, the CEO of the Italian company Eni also stated on Friday that his company has no plans to initiate new oil projects in Iran. According to Reuters, Claudio Descalzi said at the company's annual shareholders' meeting that all of the company's claims for past investments from Iran have been received. The U.S. sanctions have set a 180-day deadline for Iran's oil customers, meaning these companies have a few months to find potential new markets. According to Reuters, the largest oil refinery in Greece, Hellenic, which was the first European company to purchase oil from Iran after the sanctions were lifted in January 2016, has now expressed concern about continuing this practice. A spokesperson for Hellenic told Reuters, 'We are closely monitoring developments following the new U.S. government's decision and will assess our position and business arrangements according to the new situation.' He added, 'In any case, we will follow international regulatory frameworks, and since our crude oil sources are diverse and flexible, we do not think these developments will have a significant impact on our operations.' On the other hand, according to Reuters, informed sources in global trading companies predict that banking issues will soon lead to a decline in Iran's oil exports. An informed source in a trading company, who wished to remain anonymous, told the news agency, 'Apparently, we can continue our work for up to six months, but the important issue is the banks, and if the banks stop us, we may also abandon [buying oil from Iran].' A senior trader from another oil company also told Reuters that 'banking issues are expected to create a fundamental problem for Iran's oil trade.' Another informed source also told the news agency that 'even if exemptions are granted, the volume of oil imports from Iran will still decrease.' Meanwhile, Reuters reports that oil prices rose slightly on Friday, stating that this was influenced by the outlook for further U.S. sanctions against Iran. According to this report, there are signs that other OPEC countries intend to increase their production to compensate for the shortfall in oil resulting from reduced Iranian exports.