Iran MPs ready to ban oil exports to EU
Iran’s parliament said on Tuesday it was ready to impose a ban on oil exports to some European states, the country’s English-language Press TV reported.
“In retaliation to the Zionist (Israel)-backed measure of the European countries to ban Iran oil, we are ready to impose a ban on oil exports to some European countries,” lawmaker Mohammad Javad Karimi-Qoddusi said.
Meanwhile, a report said trade between Asia and Iran is likely to slow as new US sanctions make payments more difficult, although the more determined can still find a route through Middle Eastern intermediaries.
On Sunday, US President Barack Obama authorised new measures which extend sanctions to all Iranian financial institutions and require financial institutions doing business in the United States to block and freeze transactions having a suspected link to Iran.
Previous sanctions had only required American banks to reject those transactions. Asian importers of Iranian crude, fuel oil and iron ore will find the sanctions complicate payment, which already often goes through intermediaries in the Middle East.
Iran will be forced to rely more on settlement in illiquid currencies, which raises its cost of trade and adds to pressure on its currency.
“Iranian cargoes I can get, that’s not a problem. But how to pay is a problem,” said an iron ore trader in New Delhi. Some Indian rice exporters already have reported defaults by Iranian customers, after a rial devaluation in January made payments more expensive for both the Iranian importers and the Dubai intermediaries, who must convert rial into dollars to transfer money back to India.
Iranian fuel oil shipments through Singapore are slowing as sanction worries deter traders, while some Iranian iron ore exporters are accelerating loadings to China for fear of even more difficulty procuring ships and payment later this month.
Iran’s economy is already so weakened that its oil exports are more valuable than its imports of food and consumer goods, making it difficult to offset its exports by paying for imports.
An agreement between Iran and India to settle 45 percent of Indian crude oil purchases in rupees leaves Iran saddled with a currency that is only partly convertible.
Iranian money, an estimated $5 billion so far, is piling up in South Korean banks as South Korean refiners continue to pay for shipments in won, which the banks cannot legally transfer back to Tehran.
Only a select few Chinese banks are still willing to process payments for Iranian shipments, and those must be filtered to be sure none of the counterparties appear on official sanction lists, an exporter in China said.
Customers are also required to issue a guarantee to the banks opening letters of credit that any losses due to sanctions will be borne by the buyer, not the bank.
Chinese buyers of Iranian iron ore must pay 25 percent in advance and settle the remainder in UAE on presentation of the bill of lading, one Indian trader said. Other iron ore or fuel oil buyers pay with direct cash transfers, sometimes routed through more than one intermediary before ending up in a Middle East bank account belonging to the Iranian exporter. The exporter uses its representative office in the third country to bring the money home to Iran.
If trade with Iran slows, it will generally be a bigger problem for Iran than for its customers.
For instance, about one-third of Iran’s iron ore production is sold to China, but that only accounts for about 3 percent of China’s massive imports. But Iranian crude is still an important source for Asian buyers, making up roughly one-tenth of imports into India, China, Japan, and South Korea. – Reuters
