Iran aims to replace Russian oil in Europe

Iran aims to fill the gap left behind by Russia in the European oil market if the country can secure an agreement with world powers over its nuclear program, Bloomberg reports.

Iran’s state oil producer will try to win back customers in countries including Greece, Italy, Spain and Turkey if sanctions targeting the country’s energy industry and economy are eased, according to people with knowledge of the strategy. of Iran. At the end of the year, Europe will ban most of its member states from buying cargoes of Russian oil, creating supply uncertainty.

Both Iran and Russia are subject to economic sanctions imposed mainly by Western countries. European Union nations are set to cut off most of Russian crude from December 5 as punishment for Russia’s invasion of Ukraine. The US has led the way in imposing increasingly tough sanctions over the past four years in an effort to slow Iran’s nuclear program.

For Iran, the European focus could help it face intensifying competition in its valuable Asian market from an influx of discount Russian cargoes.

With a nuclear deal seemingly close, Iran sees an opportunity to replace some of the Russian oil that European refiners will no longer be able to buy, according to sources who spoke on condition of anonymity about its energy strategy. country. Iran’s crude is of quite similar quality to that of the Russian Urals and can serve as an alternative.

All of these Mediterranean countries previously bought Iranian crude, with Europe generally importing about 600,000 barrels per day from the country when sanctions were not in place. Even if sales rebound to those levels, it will only partially replace Russian oil, with Citigroup seeing about 1.25 million bpd of Russian crude and refined product sales to Europe at risk from the sanctions.

Once Iran can return to the market, it will seek to sell its barrels at full price, the sources said. At present, Iranian crude is mainly sold in Asia. Buyers are getting discounts to offset difficulties in transporting and insuring cargo that continue to be complicated by sanctions, according to Middle East crude traders.

Iran has been forced to increase discounts to compete with the influx of discounted Russian cargo.

Competition in Asia is relentless. According to a Western official, Russia has approached several Asian countries to discuss supplying oil under long-term contracts at deep discounts. At the same time, the US is seeking to build consensus on a plan to cap the price of Russian oil in order to deprive the Russian government of funds.

Iran has increased oil production and exports faster than expected after the latest sanctions relief under the 2015 nuclear deal. Now it is preparing to try again and hopes to turn its barrels into demand.