The Middle East Policy Council is a tax-exempt, 501(c)(3) nonprofit, nonpartisan, educational organization founded in 1981 to provide policymakers and the public with credible, comprehensive information and analysis on political, economic, and cultural issues pertaining to U.S.-Middle East.
Nathaniel Kern, Matthew M. Reed
If you believe state media in Iran, the Islamic Republic is now preemptively boycotting some states in the European Union, after the EU announced it would boycott Iranian crude after July 1. Such a move would make sense so long as Iran could export that oil elsewhere. But a wealth of data, statements by executives, and denials by corporate spokesmen across Europe combine to suggest Iran’s preemptive boycott is mere propaganda—and that European buyers are replacing Iranian crude with Libyan, Nigerian, and Saudi imports.
The preemptive boycott first made headlines two months ago. After complaining that initial reports were inaccurate and that the EU had not been cut off as early as February, Iranian officials claimed they had delivered ultimatums to six EU members. Iran demanded, according to the oil ministry, that European countries sign long-term oil purchase agreements or be cut off sooner than July with little time to arrange alternatives. European envoys later said no ultimatums were delivered to their offices.
On February 19, the ministry announced it would no longer export oil to the U.K. and France, two countries which rallied behind tougher sanctions targeting Iran for its nuclear posture. What Iranian state news organizations failed to report was the fact that France stopped importing crude from the country in 2011. Christophe De Margerie, CEO of France’s largest oil company, Total SA, confirmed so on January 27 when interviewed by BloombergNews. The Wall Street Journal also reported on February 20 that “Total, which imported virtually all the Iranian oil destined for the French market for its refineries, stopped buying crude in December.”
Energy Information Administration data from the first half of 2011 reveals that the U.K imported only 11,000 barrels per day (bpd) from Iran before Iranian-European relations collapsed and the British embassy in Tehran was attacked on November 29. Marlene Holzner, energy spokeswoman for the European Commission (the executive office of the EU), responded to Iran’s claims by citing official EU data proving the U.K imported zero barrels of Iranian crude in the second half of 2011.
European denials, however credible and bolstered by hard data, have not prevented Iran’s state media from making similar claims in April. Regardless of the facts, recent reports assert that Spain and Greece were prematurely cut off from Iranian crude before the EU embargo could take hold in July. Other Iranian broadcasts suggest that Italy has been cut off and Germany will be soon.
But on April 10, Spain’s Ministry of Energy responded with data showing that Spain halted imports from Iran months ago. Spokesmen from Repsol and Cepsa—Spain’s largest refiners—confirmed that imports were severed in January and February, months before state media claimed the countries were being punished for their planned embargo. According to a Repsol spokesman, “We stopped sourcing crude from Iran in January so the halt has no material effect on our supplies, which we have replaced with a number of sources, mainly Saudi crude.” Cepsa’s spokesman echoed Repsol’s statement, saying his company had not lifted oil from Iran in weeks and was not planning to in the near future.
Greece remains the most vulnerable EU country because it is dependent on Iranian crude and suffers from an ongoing economic crisis so severe that it threatens much of Europe. But on April 5, Reuters cited a senior executive at Hellenic, Greece’s top refiner, who said all purchases were suspended because sanctions had made it impossible to pay. If Greece’s top refiner cannot complete transactions then it is safe to assume that smaller ones are unable to as well. And so Greece appears to have cut ties with Iran earlier than expected and perhaps not by choice. But Iran clearly did not cut off Greece prematurely in order to send a political message.
Press TV, another state-owned media outlet, announced on April 10 that Italy would be the next victim of Iran’s preemptive boycott. But Italian refiners reached for comment have denied this is the case, saying they have received no notification. Italian petroleum and energy consumption overall has dropped approximately 10 percent since last year. New data recently made public by Unione Petrolifera, an industry body, showed that Italy cut crude imports from Iran in half in February compared to the previous month, after new sanctions were announced.
Italy still imported roughly 101,500 bpd from Iran in February—but the sharp decline predates Iranian broadcasts by two months, suggesting the move was deliberate on the part of Italian refiners. More data in the coming months could very well prove that Italian imports from Iran shrank in March as well, if more oil is imported from countries like Libya and Iraq. Both countries increased production in the first quarter of 2012.
On April 11, Iran’s Arabic-language network, Al-Alam, reported that Germany would soon be cut off. But often cited statistics show German imports of Iranian crude averaged only 8,000 bpd in the third quarter of 2011. The announcement is absolutely inconsequential, since it represents less than one percent of all crude imported by Germany last year. Refiners can easily make up the difference.
The International Energy Agency’s most recent report estimates that Iranian production fell by 50,000 bpd in March. Overall production stands at 3.3 million bpd, which is 250,000 bpd short of last year’s pre-sanction levels. Iran’s first quarter shortfall may be explained by lengthy negotiations held between China’s Unipec and the National Iranian Oil Company. These negotiations delayed Chinese loadings of Iranian crude until March. But total exports could still drop by more than 800,000 bpd this summer after the EU ban is matched by significant cuts in countries like Turkey, Japan, Taiwan, South Africa, Malaysia, and South Korea.
Although Iran’s nuclear posture has not yet changed due to sanctions, official statements and broadcasts show the regime is struggling to frame setbacks as victories. Data and rebuttals from across Europe prove Iran is not cutting off customers prematurely. The truth is quite the opposite: refiners in the EU are shifting to new sources well before the European embargo takes hold on July 1. Observers should expect Iranian officials to continue denying that sanctions are hurting oil exports in the coming months, even though sanctions will bite deeper and more customers outside the EU are expected to cut imports to avoid U.S. sanctions.
Perhaps most revealing of all, Iran has taken the extraordinary step in recent weeks of disabling tracking systems on most ships in its tanker fleet, thus making it difficult for the industry to monitor sales. Industry sources also report that Iran may be offering financing, insurance, free freight, and generous credit terms, allowing buyers to delay payments for up to six months for each cargo of two million barrels. Combined these deal sweeteners may amount to a 10 percent discount on the value of each supertanker.
Foreign Reports is a Washington, D.C.-based consulting firm that writes and distributes timely intelligence reports on political developments in the Middle East relevant to oil markets. Oil companies, governments, and financial institutions rely on Foreign Reports for their insight and analysis on key issues affecting the world generally and the Middle East specifically. The firm was founded in 1956 and the current President is Nathaniel Kern.
The Middle East Policy Council is a tax-exempt, 501(c)(3) nonprofit, nonpartisan, educational organization founded in 1981 to provide policymakers and the public with credible, comprehensive information and analysis on political, economic, and cultural issues pertaining to U.S.-Middle East.
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Nathaniel Kern, Matthew M. Reed
If you believe state media in Iran, the Islamic Republic is now preemptively boycotting some states in the European Union, after the EU announced it would boycott Iranian crude after July 1. Such a move would make sense so long as Iran could export that oil elsewhere. But a wealth of data, statements by executives, and denials by corporate spokesmen across Europe combine to suggest Iran’s preemptive boycott is mere propaganda—and that European buyers are replacing Iranian crude with Libyan, Nigerian, and Saudi imports.
The preemptive boycott first made headlines two months ago. After complaining that initial reports were inaccurate and that the EU had not been cut off as early as February, Iranian officials claimed they had delivered ultimatums to six EU members. Iran demanded, according to the oil ministry, that European countries sign long-term oil purchase agreements or be cut off sooner than July with little time to arrange alternatives. European envoys later said no ultimatums were delivered to their offices.
On February 19, the ministry announced it would no longer export oil to the U.K. and France, two countries which rallied behind tougher sanctions targeting Iran for its nuclear posture. What Iranian state news organizations failed to report was the fact that France stopped importing crude from the country in 2011. Christophe De Margerie, CEO of France’s largest oil company, Total SA, confirmed so on January 27 when interviewed by Bloomberg News. The Wall Street Journal also reported on February 20 that “Total, which imported virtually all the Iranian oil destined for the French market for its refineries, stopped buying crude in December.”
Energy Information Administration data from the first half of 2011 reveals that the U.K imported only 11,000 barrels per day (bpd) from Iran before Iranian-European relations collapsed and the British embassy in Tehran was attacked on November 29. Marlene Holzner, energy spokeswoman for the European Commission (the executive office of the EU), responded to Iran’s claims by citing official EU data proving the U.K imported zero barrels of Iranian crude in the second half of 2011.
European denials, however credible and bolstered by hard data, have not prevented Iran’s state media from making similar claims in April. Regardless of the facts, recent reports assert that Spain and Greece were prematurely cut off from Iranian crude before the EU embargo could take hold in July. Other Iranian broadcasts suggest that Italy has been cut off and Germany will be soon.
But on April 10, Spain’s Ministry of Energy responded with data showing that Spain halted imports from Iran months ago. Spokesmen from Repsol and Cepsa—Spain’s largest refiners—confirmed that imports were severed in January and February, months before state media claimed the countries were being punished for their planned embargo. According to a Repsol spokesman, “We stopped sourcing crude from Iran in January so the halt has no material effect on our supplies, which we have replaced with a number of sources, mainly Saudi crude.” Cepsa’s spokesman echoed Repsol’s statement, saying his company had not lifted oil from Iran in weeks and was not planning to in the near future.
Greece remains the most vulnerable EU country because it is dependent on Iranian crude and suffers from an ongoing economic crisis so severe that it threatens much of Europe. But on April 5, Reuters cited a senior executive at Hellenic, Greece’s top refiner, who said all purchases were suspended because sanctions had made it impossible to pay. If Greece’s top refiner cannot complete transactions then it is safe to assume that smaller ones are unable to as well. And so Greece appears to have cut ties with Iran earlier than expected and perhaps not by choice. But Iran clearly did not cut off Greece prematurely in order to send a political message.
Press TV, another state-owned media outlet, announced on April 10 that Italy would be the next victim of Iran’s preemptive boycott. But Italian refiners reached for comment have denied this is the case, saying they have received no notification. Italian petroleum and energy consumption overall has dropped approximately 10 percent since last year. New data recently made public by Unione Petrolifera, an industry body, showed that Italy cut crude imports from Iran in half in February compared to the previous month, after new sanctions were announced.
Italy still imported roughly 101,500 bpd from Iran in February—but the sharp decline predates Iranian broadcasts by two months, suggesting the move was deliberate on the part of Italian refiners. More data in the coming months could very well prove that Italian imports from Iran shrank in March as well, if more oil is imported from countries like Libya and Iraq. Both countries increased production in the first quarter of 2012.
On April 11, Iran’s Arabic-language network, Al-Alam, reported that Germany would soon be cut off. But often cited statistics show German imports of Iranian crude averaged only 8,000 bpd in the third quarter of 2011. The announcement is absolutely inconsequential, since it represents less than one percent of all crude imported by Germany last year. Refiners can easily make up the difference.
The International Energy Agency’s most recent report estimates that Iranian production fell by 50,000 bpd in March. Overall production stands at 3.3 million bpd, which is 250,000 bpd short of last year’s pre-sanction levels. Iran’s first quarter shortfall may be explained by lengthy negotiations held between China’s Unipec and the National Iranian Oil Company. These negotiations delayed Chinese loadings of Iranian crude until March. But total exports could still drop by more than 800,000 bpd this summer after the EU ban is matched by significant cuts in countries like Turkey, Japan, Taiwan, South Africa, Malaysia, and South Korea.
Although Iran’s nuclear posture has not yet changed due to sanctions, official statements and broadcasts show the regime is struggling to frame setbacks as victories. Data and rebuttals from across Europe prove Iran is not cutting off customers prematurely. The truth is quite the opposite: refiners in the EU are shifting to new sources well before the European embargo takes hold on July 1. Observers should expect Iranian officials to continue denying that sanctions are hurting oil exports in the coming months, even though sanctions will bite deeper and more customers outside the EU are expected to cut imports to avoid U.S. sanctions.
Perhaps most revealing of all, Iran has taken the extraordinary step in recent weeks of disabling tracking systems on most ships in its tanker fleet, thus making it difficult for the industry to monitor sales. Industry sources also report that Iran may be offering financing, insurance, free freight, and generous credit terms, allowing buyers to delay payments for up to six months for each cargo of two million barrels. Combined these deal sweeteners may amount to a 10 percent discount on the value of each supertanker.
Foreign Reports is a Washington, D.C.-based consulting firm that writes and distributes timely intelligence reports on political developments in the Middle East relevant to oil markets. Oil companies, governments, and financial institutions rely on Foreign Reports for their insight and analysis on key issues affecting the world generally and the Middle East specifically. The firm was founded in 1956 and the current President is Nathaniel Kern.