Iran General NewsChina firms selling fuel to Iran as US sanctions...

China firms selling fuel to Iran as US sanctions loom

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ImageReuters: State-run Chinese companies are selling gasoline to Iran, a move that could undermine U.S. pressure on Iran to give up its nuclear programme, traders and a newspaper report said on Wednesday. ImageBEIJING/LONDON, Sept 23 (Reuters) – State-run Chinese companies are selling gasoline to Iran, a move that could undermine U.S. pressure on Iran to give up its nuclear programme, traders and a newspaper report said on Wednesday.

Although some sources said the trade had been quietly ongoing for at least a year as Chinese companies joined a handful of global oil traders and Indian refiners who regularly sell to Iran, the revelation of this flow comes at a time when Western powers may consider target Iran's fuel imports if it refuses to enter talks over its disputed nuclear programme.

Iran is the world's fifth-largest crude exporter but imports up to 40 percent of its gasoline as it lacks the refining capacity to meet domestic demand.

State-run Chinese firm Zhuhai Zhenrong Corp, the world's largest Iranian crude buyer by company and among the first to heed Tehran's call to pay in euros instead of U.S. dollars, has been shipping a cargo or two each month to Iran for at least a year, two trade sources familiar with the company told Reuters.

The Financial Times, citing traders and bankers familiar with Iran's purchasing, reported on on Wednesday that China supplies Iran through intermediaries. Oil sources contacted by Reuters said it was also possible that Chinese trading companies were buying spot gasoline cargoes from elsewhere to sell to Iran.

"We estimate, based on what we are hearing in the market, that 30,000-40,000 barrels a day of Chinese petrol is making its way from the Asian spot market to Iran via third parties," the newspaper quoted Lawrence Eagles, head of commodities research at JPMorgan, as saying.

The United States has agreed to take part in talks on Oct. 1 between Iran and the so-called "P5+1," which includes the five permanent members of the U.N. Security Council — Britain, China, France, Russia and the United States — and Germany.

The meeting is seen as a move toward President Barack Obama's pledge during last year's U.S. presidential campaign to try to improve relations with Iran through more direct contacts. The two countries have not had diplomatic ties since 1980.

DATA SHOW NO CHINA GASOLINE TO IRAN

Traders at both Sinopec Corp and PetroChina, China's dominant oil refiners and trading firms, told Reuters that they are not selling any gasoline to Iran.

"We used to be a regular, direct supplier to Iran back in between 2001 and 2004, when we had lots of surplus barrels for export and there was no credit/embargo problems as we are having now," said a Sinopec trader.

Official customs data issued on Tuesday showed that none of China's gasoline exports this year have been shipped directly to Iran, although overall sales have surged. Nearly half its gasoline is shipped to Singapore, Asia's main trading and storage hub, much of which is likely then sold on.

Whether the gasoline is produced in China or not, the trade is further evidence of the growing energy ties that bind China, the world's No. 2 crude oil consumer, and Iran, which holds the world's second-largest crude oil reserves and desparately needs investment in order to develop them.

Iran's oil minister said last week the country was ready for any fuel sanctions and had signed deals with other countries to purchase more gasoline.

Iranian state media has also reported that Iran will begin importing diesel again by the end of this month.

Zhuhai Zhenrong, which has been lifting Iranian crude for more than a decade, extended its agreement with National Iranian Oil Co (NIOC) to import 240,000 bpd of crude for 2009.

While selling fuel to Iran isn't illegal or in violation of any specific international sanctions, it is becoming an increasingly popular way to pressure Tehran.

The U.S. Senate in July voted to ban firms that sell gasoline to Iran from also receiving Energy Department contracts to deliver crude to the U.S. Strategic Petroleum Reserve.

Privately owned Indian refiner Reliance Industries, once a mainstay supplier of fuel to Iran, has curbed shipments this year, just as it starts up a massive new facility and begins to make efforts to sell more fuel into the U.S. market.

While gasoline continues to be shipped regularly to Iran, the trade has become increasingly complex due to the reluctance of Western banks to finance letters of credit, reducing the number of companies willing to take the risk, traders say. (Reporting by Daniel Fineren in London, Chen Aizhu in Beijing; editing by Andrew Roche )

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