London — European refiners are already experiencing difficulties in shipping Iraniancrude as shipowners are starting to avoid this route for fear of falling foulof US sanctions, industry sources said Wednesday.
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Several European-owned tanker owners are becoming reluctant to move Iranianstems for fear of secondary sanctions from the US just a week after PresidentDonald Trump decided to withdraw from the Iran nuclear deal.
International buyers of Iranian oil have until November 4 to wind downcontracts before the US reimposes sanctions on the oil, energy, shipping andinsurance sectors, according to a US Treasury Department fact sheet.
But the London P&I Club, which advises shipowners on insurance, issued acircular Wednesday to its members saying that its lawyers had been notified"informally" by the US Department of Treasury "that any new Iran-relatedtransactions (entered into after May 8), if it were a sanctionable activityunder the US secondary sanctions, could result in penalties being imposed."
This statement has begun to alarm some of the European crude buyers andshipowners.
"We will have to avoid calling at Iranian ports for now as it has been mootedthat sanction may be applicable on any contracts made after May 8, so we areerring on side of caution and avoiding Iranian ports until there is moreclarity on the situation," a Greek shipowner active on the Iran-Europe routesaid.
Sources said due to these hindrances in sourcing tankers, European buyers werealready starting to buy alternative crudes like Russia?s Urals, Saudi Arabia?sArabian Heavy and Iraq?s Basrah Light.
"Today it looks like many June lifters [Iranian barrels loading in June] willhave to be canceled due to not being able to fix ships," a crude oil traderactive in the Mediterranean market said. "We saw the Greeks and the Turks buyUrals yesterday to cover Iranian [barrels]."
The only Iran-Europe fixture that was transacted Wednesday was the Suezmaxvessel Episkopi which was fixed for May 27-28 loading dates but sources saidthis tanker was taken as part of a contract-of-affreightment (term contractbasis) which predated May 8.
The Ithaki Warrior failed subjects for a Kharg Island-Mediterranean route forJune 1 loading because it failed to get P&I coverage, according to sources.
Europe is a pivotal outlet for the OPEC member, taking around 700,000 b/d, ora third, of Iranian crude exports. The key buyers of Iranian crude in thewider European region are Turkey, France, Italy, Spain and Greece.
European refiners were gradually expected to reduce their purchases due totheir economic exposure in the US, even if the EU governments continue tosupport the original JCPOA.
These sanctions might affect companies buying Iranian crude that involvesignificant dollar transactions or US banks or have a sizeable US presence.
Iran, the third-largest oil producer in OPEC after Saudi Arabia and Iraq, isproducing around 3.82 million b/d of crude oil, according to S&P Global Plattsestimates.
In 2011-15, when the EU and US previously levied sanctions on thetransportation and purchase of Iranian crude, Iran saw its exports fall byalmost 1 million b/d.
Iran has doubled its oil exports to about 2.2 million-2.4 million b/d sincethe nuclear deal was implemented in January 2016.
--Eklavya Gupte, firstname.lastname@example.org