FDD Welcomes Reports that Swiss Energy Company Has Ended Gasoline Sales to Iran

Washington, D.C. (January 11, 2010) – The Foundation for Defense of Democracies today welcomed reports (here and here) that Swiss energy company Glencore has ended its sales of gasoline to Iran in advance of refined petroleum sanctions legislation now moving through Congress. It cautioned, though, that continued monitoring will be needed to ensure that companies that exit the market do not return or attempt to direct their sales to Iran through other companies.

“Companies increasingly recognize the significant risks they face in doing business with a regime that oppresses its people, supports terrorism abroad, and continues its illegal nuclear weapons program in defiance of the international community,” said FDD Executive Director Mark Dubowitz. “However, we have seen before that companies will jump into and out of the market based on their evaluation of the political risk and create sophisticated schemes to continue to do business with the regime.”

“The administration and the Congress are currently considering numerous sanctions to pressure the regime over its illegal pursuit of nuclear weapons,” said Dubowitz. “These sanctions must target the energy sector — both Iran’s gasoline partners and the Revolutionary Guards’ leaders and front companies active in Iran’s energy sector. Energy is the lifeblood of the ruling triumvirate of Supreme Leader Ali Khamenei, President Mahmoud Ahmadinejad and the Revolutionary Guards. Oil provides about 80% of Iran’s export earnings and 50% of government revenue.”

Although it is a major producer of crude oil, Iran must import up to 40% of the gasoline it needs because it has failed to invest in the refinery capacity necessary to meet its domestic consumption.

Both the House and the Senate have advanced the Iran Refined Petroleum Sanctions Act (IRPSA) to impose sanctions on companies supplying gasoline to Iran and on the insurance, reinsurance, and shipping companies that facilitate this trade. On December 15, the House approved IRPSA by a vote of 412-12. On Oct. 29, the Senate Banking Committee approved the Dodd-Shelby Comprehensive Iran Sanctions, Accountability, and Divestment Act (S.2799), which combines several pieces of sanctions legislation, including the Senate Version of IRPSA. It is expected to be considered by the full Senate later this month.

Iran’s major gasoline suppliers include the Swiss-Dutch companies Vitol and Trafigura; the British-Dutch multinational Shell; the French energy company Total; Russia’s LUKOIL; the state-owned Malaysian energy company Petronas; and China’s state-run Zhuhai Zhenrong Corp.

India’s Reliance Industries has also been a major supplier of gasoline to Iran, both directly and through a Kuwaiti trading firm, the Independent Petroleum Group, which emerged in October as Iran’s largest gasoline supplier. According to a Dec. 17, 2009 Reuters report, IPG is buying some of its gasoline destined for Iran from Reliance, which at one point had been Iran’s third-largest gasoline provider. Just two weeks earlier Reliance claimed that the company had “not sold gasoline to Iran since April” and that it had “a destination-restriction clause in our contract to prevent sale to Iran.”

British Petroleum exited the market in 2008 after determining that the political risks outweighed the benefits of remaining.

Japanese, British, German, and Norwegian insurance and reinsurance companies underwrite the gasoline shipments or the ships carrying this gasoline to Iran. These include the Japanese Shipowners Mutual Protection & Indemnity Association, British insurance company Lloyd’s of London, Standard Club (U.K.), P&I North of England, the London Steamship Owners Mutual Insurance Association, the German reinsurance company Munich Re and Norway’s Assuranceforeningen Gard and Assuranceforeningen Skuld.

FDD researches the energy companies that supply Iran with gasoline and has identified significant points of leverage that can be used to convince them to end their trade. It also conducts research on the insurance and reinsurance companies that facilitate gasoline sales to Iran.

For more information on FDD’s Iran Energy Project, the companies involved in supplying Iran with gasoline, and ways to significantly reduce Iran’s gasoline imports, please visit IranEnergyProject.org or contact Judy Mayka at
[email protected]
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