April 20, 2010 | Press Release

FDD Welcomes Reports that Malaysia’s Petronas Has Ended Gasoline Shipments to Iran

Washington, D.C. (April 15, 2010) – The Foundation for Defense of Democracies welcomed reports that Petronas, the Malaysian state-owned energy company, has stopped supplying gasoline to Iran. Petronas joins seven other energy traders that have reportedly pulled out of the Iranian market in advance of potential U.S. sanctions targeting Iran's energy sector, including gasoline imports.

FDD provides leading research and analysis in support of strong, broad-based energy sanctions, including gasoline, natural gas, and oil sanctions, as part of a comprehensive strategy to end the Iranian regime's pursuit of nuclear weapons.

“This decision by Petronas shows that simply the threat of sanctions is making it more difficult for Iran to find reliable suppliers willing to risk their US business interests,” said FDD Executive Director Mark Dubowitz. “Significantly, it's not only Iran's gasoline suppliers exiting the market, but also energy investors, banks, technology providers, and insurers who also face growing pressure to decide between doing business with the Iranian regime and continuing their business relationships in the lucrative U.S. market. The focus of the sanctions debate soon will shift to sanctions enforcement and a game of 'whack-a-mole' between US authorities and Iran's energy partners.”

“However, the reported departure of these companies from the Iranian market in no way lessens the need for Congress to pass and President Obama to sign the tough new energy sanctions, including gasoline sanctions, pending in Congress,” said Dubowitz. “Without sanctions, these companies could return at any time if they feel the political risks have lessened. Reports that Chinese companies are entering the market should also spur action on tough sanctions legislation.”

The Iran Sanctions Act (formerly the Iran-Libya Sanctions Act of 1996) prohibits the investment of more than $20 million in one year in the Iranian energy sector. Both the House and the Senate have advanced legislation to expand this legislation to impose sanctions on companies supplying gasoline to Iran and on the insurance, reinsurance, financing, technology, and shipping companies that facilitate this trade. On December 15, 2009, the House approved the Iran Refined Petroleum Sanctions Act (IRPSA) by a vote of 412-12. On January 28, 2010, the full Senate 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. The House and Senate bills will be reconciled in conference committee.

Since the push for strengthened sanctions began, eight of Iran's major gasoline suppliers — BP, Vitol, Trafigura, Glencore, Shell, Reliance, Lukoil, and Petronas — have reportedly said they would end their gasoline supplies to Iran.

Reuters has reported that Chinaoil, the trading unit of the state-owned China National Petroleum Corporation, made its first direct gasoline sales to China since at least January of 2009. Reuters also reported that Sinopec, another Chinese company, is poised to resume direct sales to China after a hiatus of more than six years. France's Total has emerged has one of Iran's largest suppliers of gasoline.

The threat of sanctions has caused numerous banks to stop underwriting gasoline sales to Iran, and three reinsurance companies, Munich Re, Allianz, and Hannover Re, have also exited the market, increasing the difficulties that Iran will have importing the gasoline it needs to meet its domestic requirements. A number of energy companies are also reconsidering their investments in the Iranian energy industry.

For more information on FDD's Iran Energy Project, and the companies involved in Iran's energy industry, please visit IranEnergyProject.org or contact Judy Mayka at [email protected]

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Indo-Pacific