IHS: New sanctions against Iran turn country into supplier of last resort

Oil&Gas Materials 25 January 2012 18:43 (UTC +04:00)

Azerbaijan, Baku, Jan.25 / Trend A.Badalova /

New sanctions imposed by the U.S. and the European Union against Iran turn the country from a mainstream oil producer to a supplier of last resort, the analysis of the global information company IHS says.

"This latest move /introduction of sanctions/ effectively turns Iran from a mainstream oil producer to a potential supplier of last resort, with all that entails in terms of loss of access to markets, the ability to dictate delivery and payment terms, and, perhaps most importantly, access to foreign currency," IHS says.

The European Union banned imports of oil from Iran on Monday and agreed to freeze the assets of Iran's central bank, joining the U.S in a new round of measures.

The latest sanctions by the European Union will be fully enforced by July 1.

According to IHS, new measures against Iran, however, include some compromises designed to soften the blow to EU member states' energy intensive industries but nonetheless increase the pressure on the Iranian regime.

"With regards to oil and petroleum, the ban will come into effect from 1 July, as mooted earlier and the ban on petrochemical products will be implemented on 1 May. This gradualist approach provides breathing space for states that are especially dependent on Iranian crude - Greece, Italy and Spain to find alternative suppliers.

According to International Energy Agency's (IEA) figures, the EU states accounted for nearly 600,000 barrels per day (bpd) of Iranian oil purchases in the first nine months of 2011, which equivalent to around 24 percent of its market. Greece took 30 percent of its supplies from Iran in that period, Italy - 13 percent, Spain - 12 percent.

The measures obviously have some repercussions for EU crude buyers, most notably Greece, IHS believes. According to the company, the bigger issue for Greece is securing finance for substitution of Iranian oil.

"As the Greek sovereign debt crisis has intensified, so banks and suppliers from other countries have been unwilling to provide finance, concerned that a collapse in the country's finances would lead to default on private deals," IHS says.

IHS however believes that some Iranian oil is likely to find buyers.

According to HIS, China's previous request for longer payment terms from Iran is a sign that remaining buyers (around 44 percent of whom are in non-OECD Asia) will be looking for incentives to continue dealing with Iran.

However, whether all such crude finds a home remains to be seen, IHS says.