Turkmen Crude Oil Discharged in Iran bypassing American Sanctions

On August 3, a VF Tanker-20 under the Russian flag arrived at the Iranian Caspian port of Neka and discharged around 6,000 tons of Turkmen-origin crude oil produced by the company "Dragon Oil". The discharge of that cargo took place on 3-4 of August into the terminal, which is owned and operated by the National Iranian Oil Company (NIOC).

This is the first time in a long time that Dragon Oil, 100% owned by the Emirate National Oil Company (ENOC), decided to deliver crude oil cargo to Iran independently, via its trading sister company “ENOC Singapore”.

To date, Dragon Oil sold all its crude oil export volumes on tenders on an FOB Aladja- Turkmenistan basis. Due to the sanctions against Iran, from 2011, export volumes were transported towards Europe solely through the territories of Azerbaijan (either via pipeline Baku-Tbilisi-Ceyhan or via railways Baku-Batumi) and Russia (via pipeline Makhachkala-Novorossiysk).

The decision of Dragon Oil and ENOC to resume oil supplies to Iran caused surprise among market participants. Despite the fact that some of the sanctions against Iran were lifted in 2016 after the “Iranian Nuclear Deal” in November 2015, many restrictions remain in place. Most of the companies prefer to wait for detailed recommendations from the Offi ce of Foreign Assets Control of the US Treasury (OFAC) before starting any business related to Iran.

In this particular case, the decision of Dragon Oil to start deliveries of crude oil to Iran looks both hasty and risky considering that the oil producer performs all fi nancial transactions in US dollars, works on a long-term basis with US contractors (for instance: the largest American oilfi eld service company “Schlumberger”) and has US citizens occupying top-management positions.

It is also surprising that ENOC, the national oil company of the United Arab Emirates, is actively developing new business with Iran, bypassing US sanctions, despite the fact that the UAE is the USA's main ally in the region.

It is not excluded that this delivery to Iran was not initially planned. Indeed, the VF Tanker-20 arrived fi rst in Baku Port, Azerbaijan, and queued on roads from July 25 to August 1. However, the vessel was rejected for discharge due to undocumented (possibly smuggled) cargo aboard the ship being found. Thereafter, ENOC redirected the tanker to the Iranian port of Neka, where it was possible to discharge cargo without actual presentation of documents for goods.

Now, market participants are waiting for further developments of the situation, as well as answers to their questions: was this oil shipment a random cargo discharged in Neka because of document issues, or is it the start of a planned program for the supply of Turkmen crude oil to Iran?

Several signs speak in favor of the second scenario: ENOC is currently very active on the freight market and several ships belonging to the Russian shipping company "VF Tanker" have been redirected to the Caspian Sea towards the port of Aladja.


08 August 2017 15:24