Iran Seeks Oil Barter as European Buyers Face Banking Hurdles

  • Persian state offering to swap crude cargoes for fuel imports
  • Greek refiner Hellenic struggled to find banks for payments

Iran’s Impact on Oil Prices – Will It Fall Further?

Iran is offering to swap exports of crude oil for imports of refined fuel as some European customers struggle to find banks to process payments, a sign the Middle Eastern nation is still having difficulty regaining markets since the removal of sanctions.

The National Iranian Oil Co. is resorting to barter because financial restrictions still impede trade, said three officials who asked not to be named citing company policy. Hellenic Petroleum SA has struggled to secure deliveries because banks wouldn’t process payments, said two people familiar with the matter.

Iran is seeking to regain lost European markets and boost exports to Asia after sanctions were removed last month upon completion of an agreement limiting its nuclear program. It loaded its first cargo of oil to Europe since 2012 this month onto a tanker chartered to French oil company Total SA. The country plans to increase exports by 1 million barrels a day this year, dismissing the possibility of joining an output freeze agreed by major producers including Saudi Arabia.

Cautious Banks

Banks are being “super cautious because they do want to have access to the U.S. markets and the U.S. rules as to what they can do aren’t particularly clear,” said Ross Denton, a partner at Baker & McKenzie LLP specializing in sanctions. “Iran is open for trade” only for entities with no direct connection to the U.S., he said.

Several European banks approached by Hellenic refused to handle transactions linked to Iran, the two people said, asking not to be identified because the matter was private.

The Greek refiner, which got as much as a quarter of its crude from Iran before the European Union embargo, agreed last month to resume purchasesimmediately and start paying debt arrears. The company hopes to overcome regulatory and logistical hurdles and implement this agreement in the next few weeks, Chief Financial Officer Andreas Shiamishis said on a conference call Thursday.

Hellenic owed NIOC $800 million for past deliveries of crude, Iran Oil Ministry’s news service Shana reported Jan. 25.

Barter Deals

Barter deals avoid the need to access bank finance for as long as many lenders remain unwilling to issue letters of credit for Iran-linked trades, the three NIOC officials said. The company is asking for at least partial cash payment for most refined-product trades and accepting transactions in Euros and other currencies, they said. It is offering products such as fuel oil in exchange for imports of gasoline and is also willing to swap crude for fuel, they said.

Even after the successful nuclear deal, some U.S. sanctions on Iran remain in place. In 2014, the nation’s regulators imposed fines on some European banks including BNP Paribas SA for processing transactions to nations under U.S. sanctions like Iran, Cuba and Sudan.

It will be a couple of months before the National Iranian Tanker Co., which operates the world’s biggest fleet of supertankers, can offer its ships for charter on the international market again, commercial director Nasrollah Sardashti said Thursday in an interview on sidelines of the Marine Money conference in Hamburg.

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