Iran petrochemicals, fuel sales explode as sanctions hit crude exports


A security guard stands in front of the Mahshahr petrochemical plant in Khuzestan province, 1032 km (641 miles) southwest of Tehran, September 28, 2011. REUTERS / Raheb Homavandi / File Photo

  • The United States imposed sanctions after leaving the nuclear pact in 2018
  • Sanctions hit crude sales, but not petrochemicals and fuels
  • Iran now derives more revenue from petroleum products than from crude exports
  • Fuel exports, often by truck, are hard to track

LONDON / SINGAPORE, Sept. 17 (Reuters) – Iranian exports of fuel and petrochemicals have exploded in recent years despite strict US sanctions, leaving Iran in a good position to rapidly increase its sales in Asia and Europe if Washington lifts its restrictions, business sources and officials said.

The United States imposed sanctions on Iran’s oil and gas industry in 2018 to stifle the Islamic Republic’s main source of revenue in a dispute with Tehran over its nuclear works.

The measures have crippled crude exports, but not sales of fuel and petrochemicals, which are more difficult to trace. Crude can be identified as Iranian by grade and other characteristics, while large tankers are more easily tracked by satellite.

Iran exported nearly $ 20 billion in petrochemicals and petroleum products in 2020, double the value of its crude exports, according to figures from the Ministry of Petroleum and the central bank. The government said in April that they were its main source of income.

“The world is big and the ways to escape sanctions are endless,” Hamid Hosseini, a member of the board of directors of the Iranian Union of Oil, Gas and Petrochemical Exporters in Tehran, told Reuters.

Competitive prices and Iran’s location near major shipping routes have made its products attractive, he said.

There are also many more buyers of refined products than importers with refineries set up to process Iranian crude.

In addition, Iran exports fuel by truck to its neighbors, which involves small transactions that are difficult for the US Treasury to detect.

Tehran has been in talks since April to revive its nuclear pact with six world powers, after the United States under President Donald Trump withdrew from the deal in 2018 and stepped up sanctions. Iran says it will only limit its nuclear work under the pact if US sanctions are removed.

SOURCE OF INCOME

Meanwhile, Iran has positioned itself well to respond if the measures are relaxed. While most countries around the world reduced throughput at refineries during the COVID-19 pandemic, Iranian gasoline exports increased 600% year on year in 2020 to 8 million tonnes, or 180,000 barrels per year. day (bpd), the customs administration indicated.

As recently as 2018, Iran was importing gasoline.

Iran’s revenue from gasoline exports was estimated at $ 3 billion in 2020, Hosseini said.

Iranian oil production is now around 2 to 2.5 million b / d, with around 2 million b / d allocated to domestic refineries and around 500,000 b / d to exports, a source close to the ministry said. of Oil, adding that Iran could increase crude production by 2 million bpd in two to three months if sanctions were lifted.

Until the sanctions were imposed, crude exports were Iran’s main source of income, typically exceeding 2 million barrels per day and reaching 2.8 million barrels per day in 2018.

The gasoline was delivered by truck to Afghanistan and Pakistan and shipped to the United Arab Emirates (UAE) across the Gulf, a source close to Iran’s Petroleum Ministry said on condition of anonymity.

The UAE Ministry of Foreign Affairs and International Cooperation did not comment.

Iran resumed fuel exports to Afghanistan in August at the behest of the Taliban, a Sunni Muslim group that seized power when US and Western forces withdrew and with which Shia Iran had strained relations. in the past. Read more

Traders said Iraq and some African countries have also purchased Iranian gasoline, while several shipments of gasoline have been shipped to Venezuela, which, like Iran, is a member of OPEC.

The Iraqi government, which for years imported gas and electricity from its neighbor under US waivers, did not respond to requests for comment on the gasoline trade.

ENCOURAGING BUYERS

Petrochemical exports reached 25 million tonnes in 2020, up from around 20 million tonnes in 2019, according to an Iranian Petroleum Ministry bulletin, while Iran’s petrochemical capacity increased to 90 million tonnes per year in 2020, from 77 million tonnes in 2019. It should exceed 100. million tonnes in 2021.

To encourage buyers, business sources said Iran often offered prices that would cover shipping and insurance costs, as well as additional fees for banking transactions. These extras have increased the cost of Iranian goods by about 25%, according to trade sources.

Even countries seeking to implement US sanctions have sometimes found it difficult to end all trade with Iran.

India has banned Iranian urea imports in domestic tenders under US pressure, but Hosseini said Iranian products are still offered through middlemen.

India’s fertilizer ministry, which writes the tenders for imports, did not respond to requests for comment. Officials in the United Arab Emirates and Iraq also did not react immediately.

Chinese companies remain the main buyer of liquefied petroleum gas (LPG), methanol and many other Iranian products, trade sources said.

China and Iran have always followed the principles of equal, fair and win-win collaboration and work in the international legal framework, China’s Foreign Ministry said in a statement to Reuters.

He said China was against unilateral sanctions and urged the United States to remove what it saw as the “long-arm jurisdiction” of such sanctions.

“If international sanctions were completely dropped, Iran would resume exporting methanol to its traditional sites instead of the vast majority going to China,” said Geoff Mullett, methanol specialist at IHS Markit, referring to d ‘other markets such as Taiwan, Japan and South Korea and Europe.

Senior IHS analyst April Tan said Iranian exports are expected to increase if sanctions fall, especially fuel oil and liquefied petroleum gas (LPG) exports to Asia.

Reporting by Bozorgmehr Sharafedin in London and Florence Tan in Singapore, additional reporting by Nidhi Verma in New Delhi, Ahmed Rasheed in Baghdad, Aziz El Yaakoubi in Dubai, Beijing newsroom; edited by Edmund Blair and Jason Neely

Our Standards: Thomson Reuters Trust Principles.


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