UpdateEU sanctions could hurt Iran’s petchem sector

26 July 2010 18:04  [Source: ICIS news]

(Confirms adoption of sanctions in first paragraph and updates)

SINGAPORE (ICIS news)--The EU on Monday adopted economic sanctions against Iran, which, sources believe, could severely affect the country's exports of petrochemicals as well as its imports from Europe of speciality polymers, catalysts, spare parts and machinery.

The EU measures, which could result in a clampdown on financial transactions between the EU and Iran, complement the tougher sanctions imposed by the UN last month in a bid to halt the country’s nuclear programme.

“Iran imports from Europe a lot of catalysts, additives and speciality polymers which are not produced in the country,” said a source close to one Iranian producer.

“So the EU curbs will severely affect Iranian petrochemical trade and manufacturing activity.”    

Europe is also a major source of machinery and spare parts for petrochemical plants in Iran. “The non-availability of spare parts could hamper production in Iran’s petrochemical sector, which is already facing operational hiccups due to the lack of skilled manpower,” said the source.

Production at several Iranian petrochemical plants has been hampered by persistent teething problems for months after their start-up. At least three plants - the Mehr Petrochemical polyethylene (PE) plant and Arya Sasol’s high density PE/medium density PE (HDPE/MDPE) and low density PE (LDPE) units - are currently offline due to technical problems.

The EU sanctions would also negatively impact the EU, said another source. “Europe imports significant volumes of methanol, for instance, from Iran at extremely competitive prices. Once the new curbs come into effect, this low-priced source would dry up, to the detriment of methanol users,” he said.

The EU sanctions follow restrictions imposed by banks in South Korea, another important exporter of spare parts and speciality polymers to Iran.

“There are indications that the Iranian government will try to explore some solutions to this impasse by holding talks with the South Korean government, as Iran is a significant source of export revenue for South Korean automobiles, electronics, polymers and machinery,” the source said.

Iran’s Petrochemical Commercial Co (PCC), the marketing and sales arm of the National Petrochemical Co (NPC), was not available for comment.

($1 = €0.77)

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By: Prema Viswanathan
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