Council Regulation (EU) 267/2012 of 23rd March 2012 ("EU Regulation") replaces the existing Council Regulation (EU) 961/2010.
SNAPSHOT OF THE EU REGULATION
The EU Regulation closes off a number of perceived pre-existing loopholes:
- Revisions to the definition of "brokering
- The definition of "transfers of funds" now includes
"non-electronic transfers"; and
- Revised rules on authorisation requests for payments to or from
an "Iranian person, entity or body".
- Any permitted dealings in crude oil contracts shipped prior to
July 1st 2012 must be notified 20
working days in advance in writing to the relevant Member
- Implementation of prohibitions and restrictions concerning
petrochemicals, gold, precious metals, diamonds and key equipment
and technology relating to the Iranian petrochemical industry;
- Prohibition on the use of specialised financial messaging
- Derogations concerning the freezing of the assets of the
Central Bank of Iran;
- Adjustments to insurance provisions; and
- Derogations concerning payments relating to diplomatic,
consular and certain international organisations.
A more detailed summary is available upon request by e mail to firstname.lastname@example.org.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) announced it would disconnect some 30 Iranian banks from the system, including Iran's Central Bank. Without access to SWIFT, it becomes almost impossible to complete large international funds transfers. This may result in more barter deals. There are "tried and tested" alternatives. If, for instance, the Iranian Oil Ministry and a Japanese oil refinery have accounts in the same bank, then any money transfer between them would be an internal bank transaction that wouldn't require using the SWIFT system. Alternatively, China may say, 'We're going to buy Iranian oil and deposit the money in a Chinese bank.' That Chinese bank may then makes those funds available to Iran to buy product from China.
US SANCTIONS EXEMPTIONS
The U.S. has exempted Japan and 10 EU states from financial sanctions because they have reduced purchases of Iranian oil, but Iran's top customers, China and India, remain at risk of such steps.
Nuclear talks between Iran and the "Iran Six" (the five permanent members of the United Nations Security Council - the United States, Great Britain, China, Russia and France - plus Germany) are due to take place in April. If these talks are positive, we may see an easing of sanctions in due course. The pending July 1st EU ban on crude oil imports may act as a catalyst for resolution.
OIL MARKET UPDATE
We calculate that if Iranian crude oil exports reduce by 10% during 2012 and if those buying Iranian crude win a 10-15% price reduction - then the Iranian economy could lose up to $24 billion.
Further tension with Iran will likely create a spike in the oil price which could well reach US$150 a barrel. It is estimated that such increase would, if sustained, cause a recession of 1% in the EU this year.
Industry group IATA have warned that fuel prices are hurting airlines and that an increase to US$150 a barrel could push some into bankruptcy.
India's Great Eastern Shipping Co Ltd is said to have faced
difficulties paying Greek firm Eurotankers (which holds an account
with RBS), for using one of its supertankers to ship Iranian crude.
The supertanker in question is said to have delivered 93,000 tonnes
of Iran Heavy crude to Mangalore Refinery and Petrochemicals Ltd at
Mangalore port on February 7th 2012.
India's Essar Oil, is said to have bought oil in three Iranian vessels in February. Insurance problems for shipments is said to have forced Shipping Corporation of India to cancel an Iranian crude delivery last month.
India publicly maintains it will not seek a waiver to U.S. sanctions, and that it sees no need to reduce oil imports from Iran because that is not required under United Nations sanctions.
The Indian government, however, is said to have privately asked refiners to cut Iranian imports by at least 15%. India and Iran are considering bartering commodities and other products for crude through a rupee account with UCO Bank (UCO).
China slashed imports of Iranian crude oil in the first quarter. There is speculation that the Chinese will seek to renegotiate lower prices from Iran moving forward.
Saudi Arabia is preparing to extend this year's unexpected jump in oil sales to the U.S., which have quietly risen 25 per cent to the highest level since mid 2008, according to preliminary US government data, a sizeable leap that appears at least partly related to the imminent completion of a major expansion at its joint-venture Motiva refinery in Texas.
Iran is shipping fuel oil to Singapore using a supertanker from its own fleet as Western sanctions make it difficult for buyers to lift cargoes off Iranian coasts. Singapore-based Kuo Oil is said to have ceased renewing its term fuel-oil purchase contract with Iran. Traders expect Iran to begin regular shipments of fuel oil to Singapore where it can be sold to local or Chinese traders.
Sri Lanka is said to be planning to purchase crude from Iraq to offset the negative effect of US sanctions concerning Iran.
Malaysian state oil firm Petronas has said it will halt all imports of Iranian crude from April.
Japan has been granted a waiver from the U.S. sanctions after cutting its Iran oil imports by the targeted 15-22% in the second half of last year.
South Korea is said to have cut Iran imports by 15% in January and February combined.
Taiwan state-run refinery CPC may halt Iran imports from July.
Sri Lanka, which relies on Iran crude for 90% of its needs, is said to have signed a deal to buy Oman crude as it works to reduce its reliance on Tehran.
The South African government is said to be planning to have alternatives to Iranian oil in place by the end of May. South Africa relies on Iran for about 29% of its oil imports.
Smuggling - Oman
The smuggling trade to Iran from Oman is said to be thriving, delivering many goods (possibly including those prohibited by international sanctions) in unmarked speedboats across the Strait of Hormuz linking the oil-rich Gulf with the Arabian Sea. It is said that some 500 boats make the journey across the Strait daily.
Iran has been shopping for wheat at a frantic pace, ordering a large part of its expected yearly requirement in a little over one month and paying a premium in non-dollar currencies to work around toughened sanctions.
Iran is said to have bought around 2 million tonnes of wheat last month from Russia, Germany, Canada, Brazil and Australia.
Iran is said to be seeking to buy more agricultural commodities from India after agreeing to import soybean meal used in livestock feed. Iranian traders are said to have bought soybean meal for delivery next month.
Indian traders have purportedly struck deals to export 60,000 tons of raw sugar to Iran for March-April delivery, in dollars, through Dubai-based middlemen. It is anticipated Iran needs to import about 324,000 tons of raw sugar by September.
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