[Debate] High oil prices shield Iran from sanctions / Oil rivals exploit western absence in Iran

[Yoshie Furuhashi]

<http://on.ft.com/Ib6CQ8>
April 17, 2012 6:03 pm
High oil prices shield Iran from sanctions
By Javier Blas in London

High oil prices are insulating Iran from the full impact of US and
European sanctions on the sale of its crude, providing Tehran with
breathing space as it prepares for a new round of nuclear talks with
western nations next month.
The Centre for Global Energy Studies (CGES), a London-based
think-tank, estimates that Iran will earn $56bn selling its crude this
year – its third-highest earnings ever – even after factoring in the
loss of roughly a third of its export volume due to sanctions.
However, analysts point out that Tehran is finding difficulties in
repatriating the funds due to the sanctions on its central bank.
Hellenic Petroleum, a Greece-based refiner, recently stopped importing
Iranian oil as it was unable to transfer its payments.
The Iranian rial has weakened significantly against the US dollar
since December – a sign that Tehran faces difficulties obtaining hard
currency.
Iran has proposed an oil-for-grain barter deal with India, currently
its biggest oil client, because of the difficulties New Delhi faces in
transferring payments from its refiners to Iran’s central bank.
Washington has imposed sanctions to penalise foreign financial
institutions dealing with Iran’s central bank, while Brussels has
approved a full embargo on Iranian crude oil starting formally from
July 1.
The western allies are trying to achieve a difficult balance: hurt
Iran enough to force it to negotiate over its nuclear programme, but
keep enough oil flowing to avoid a price spike that damages the
fragile economic recovery.
“The sanctions are not working,” said Olivier Jakob, head of the
Swiss-based oil consultancy Petromatrix, in a note to clients. “They
are definitely hurting Iran as it limits its [crude oil] exports, but
they are also hurting the rest of the world, given that the western
powers have not managed to control prices.”
The CGES, which is widely respected in the oil industry, estimates
that without the new sanctions, Iran would earn about $68bn this year
– down 5.5 per cent from $72bn in 2011. But this assumes that oil
prices remain as high as they are today. Most oil traders and analysts
believe that energy costs would be lower if Washington and Brussels
had not imposed sanctions.
The sanctions – which the think-tank predicts will reduce Iran’s oil
exports by about 600,000 barrels a day (in line with other estimates
of a drop of between 500,000 and 850,000 b/d) – would cut the revenues
to $56bn. This would still be the third-highest ever, and more than
Iran earned in any year before 2007.
Mahmoud Ahmadi-Nejad, Iran’s president, says Tehran has enough savings
to survive until 2015. “They [western powers] intend to impose an
embargo on our oil,” he said last week. “We have as much hard currency
as we need, and the country will manage well, even if we don’t sell a
single barrel of oil for two or three years.”
On Tuesday, Rostam Ghasemi, Iran’s oil minister, said the country had
yet to suffer a decline in crude exports due to the sanctions.
Washington, which measures oil export revenues differently, estimates
that Tehran earned $22bn in the first quarter of this year – roughly
the same amount it pocketed during the whole of 2003. Even if these
revenues halve in the next three quarters of the year, the country
will earn $55bn based on US government calculations – the
fourth-highest ever.
Additional reporting by Najmeh Bozorgmehr in Tehran

<http://on.ft.com/HZeIfo>
April 18, 2012 5:44 pm
Oil rivals exploit western absence in Iran
By Najmeh Bozorgmehr in Tehran

At this week’s annual exhibition for Iran’s beleaguered oil and gas
industry, the stands set aside for western companies have some
noticeable vacancies.
With even stalwarts of the long-suffering oil sector such as France’s
Total staying away for the first time this year, the gaps are being
filled by business from Asia, eastern Europe and Iran itself.
Like any oil exporter, the Islamic Republic needs access to
international technology and investment to keep production growing. As
western-led sanctions restrict that access, the energy industry is
turning to other suppliers and backdoor channels as part of a wider
national effort to minimise the devastating impact of international
isolation on its economy.
The changing make-up of the attendees of the exhibition is a tangible
illustration of that impact. Of the 1,255 Iranian and foreign
companies present, companies from Asia, as well as Russia and Ukraine,
are increasingly visible. Western representation in the four-day
event, which closes on Thursday, is largely limited to Norway’s
Statoil and Austria’s OMV, plus Beh Total, a joint venture between the
French company and a state-owned Iranian company.
“Sanctions are a kind of good opportunity for us,” says a Ukrainian
oil executive.
The same can be said for many Iranian companies, which either run as
licensees of foreign groups or are based outside the country. Global
Petro Tech Kish, for instance, is an Iranian company founded in 2006
in the neighbouring United Arab Emirates. It says it is privately
owned in spite of having some links to an Iranian state-run company.
Over the past five years, the number of offshore jackup rigs it
operates has increased from two to nine. “Sanctions have created a
chance for this company to expand and grow,” says Mehdi Hosseini, a
company official.
For the most part, he says, the company buys or rents Chinese rigs
instead of western ones and insists the quality is good because they
are usually built under the licence of European or US companies.
The need for access to international technology, in spite of the tight
sanctions regime, is increasing the opacity of Iran’s energy industry.
A growing number of companies at the exhibition this year appeared to
be operating as representatives for smaller Asian and European
businesses, with onlookers speculating that such companies are
established to help the country evade sanctions.
Such back channels, and a shift towards partners from friendlier
nations such as China, India and Russia, have helped Iran’s oil and
gas sector survive even if such partners offer a product that may not
be up to the standards of the market leaders.
“You can say the quality of Chinese products is poor, and I say that’s
right,” says Hatef Haeri, chief executive of ICG energy consultancy in
Tehran. “But that Chinese equipment is helping us continue work even
if we have to change parts frequently.”
The difficulty in accessing foreign technology and investment and the
costs and delays caused by crippling new sanctions on financial
transactions, means Iran’s hydrocarbons sector is lagging behind
government plans to develop and maintain the country’s oil and
gasfields.
Along with the unattractive terms that Iran offers to operators in the
oil and gas sector, and a purge of experienced oil officials, such
challenges have undermined the country’s energy projects in recent
years. Iran is increasingly giving its multibillion-dollar contracts
to state-owned or quasi-private Iranian companies.
Rostam Ghasemi, the oil minister, said at the exhibition on Tuesday
that Iran needs more than $40bn in investment for its oil and gas
projects by next April. It is achievable, he said, as is the goal to
increase production to 1.4bn cubic metres of gas and 5m barrels of oil
a day by 2015.
“Foreign investments are not sufficient but Iran has given up
ambitions of 8 per cent economic growth and can survive with the
current growth rate of 1 to 3 per cent,” Mr Haeri says. “In the short
run, Iran’s oil and gas sectors will not kneel down vis a vis
sanctions.”

-- 
Yoshie Furuhashi
<http://mrzine.org/>