Russians too tougher on sanctions?

Big Oil Traders Cut Shipments to Tehran Amid Sanctions Talk
By SPENCER SWARTZ

LONDON -- Some big oil traders have quietly scaled back or are preparing to halt fuel shipments to Iran amid uncertainty over whether the U.S. and Western powers will impose sanctions against the Islamic Republic for its nuclear program.

Talk of sanctions has ebbed and flowed in recent months as the West pressures Iran to curtail its nuclear program. On Wednesday, at the United Nations, Russian and U.S. leaders again raised the threat of sanctions, ahead of an Oct. 1 meeting.

Some big oil companies aren't waiting, and have been making preparations.

European oil giant BP PLC, which has extensive trading operations, stopped shipments of gasoline and other oil products to Iran at least six months ago, according to a person familiar with the matter. The person said the "overall environment," including the West's standoff with Iran over its nuclear program, had been behind the halt to shipments.

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An official at Total SA said the French oil major would stop gasoline shipments to Iran if the U.S. and other European nations were to approve measures calling for a halt on fuel exports to Iran. "If we get to that point and measures were put into law in the U.S. and Europe not to trade refined [oil] products to Iran, then we will follow the law," the Total official said.

Anglo-Dutch Royal Dutch Shell PLC, another gasoline shipper to Iran, declined to comment. U.S. oil companies are banned from selling petroleum products to Iran.

Although Iran is one of the world's biggest oil producers, it imports around 40% of its oil products. Iran's dependence on foreign gasoline and diesel is a soft spot the U.S. and some European nations could exploit if the country doesn't abide by U.N. Security Council resolutions over its nuclear program.



Iran is forced to import around 140,000 barrels a day of gasoline and diesel -- at a cost of $5 billion to $7 billion annually depending on oil prices -- because of inadequate refining capacity at home, a result of past sanctions and bureaucratic meddling in Iran that has stymied refinery development. Most of that oil product comes from European companies -- many of which have extensive U.S. operations -- and some Asian companies.

Even if gasoline sanctions come to pass, Iran has various outlets to buy oil products, though probably at higher prices. Oil Minister Masoud Mirkazemi told reporters in Vienna recently that Iran had made various arrangements to counter any cutoff in gasoline shipments; he didn't elaborate.

Venezuela said it planned on sending Iran about 20,000 barrels a day of gasoline starting next month.

China says officially it doesn't ship any gasoline to Iran, but Asian oil traders say gasoline originating from China is routinely blended with other supply and tankered to Iran. Mehdi Varzi, a London-based independent oil analyst who formerly worked for the Iranian National Oil Co., said existing shippers could sell product to Iran and hide the true origin of deliveries. Gasoline could also be trucked in from Iran's neighboring states, but it is unclear whether such countries, like Azerbaijan, a U.S. and European ally, would permit that.

Gasoline sanctions against Iran have been contemplated for months among Western policy makers, but the idea will gain impetus, at least in the U.S., if coming talks between Iran, the U.S., European nations, Russia and China yield disappointing results. Russia and China have previously signalled their opposition to sanctions against Iran's energy industry, but Russian President Dmitry Medvedev on Wednesday reversed course and opened the possibility that he could back tougher sanctions on Iran.

"The Russian position is simple. . . . Sanctions rarely lead to productive results. But in some cases sanctions are inevitable," Mr. Medvedev said following a meeting in New York with U.S. President Barack Obama on the sidelines of the U.N. General Assembly.