New sanctions may hinder Iran plans to boost petchem exports

Muhamad Fadhil

01-Sep-2014

Focus story by Muhamad Fadhil

New US sanctions dash hopes for strong Iran petchem exportsDUBAI (ICIS)–Iran’s hopes to boost petrochemical exports may just have been dashed by US-imposed fresh sanctions, which could imperil future negotiations with world powers over the country’s nuclear program, industry sources said on Monday.

The US imposed new sanctions on 25 Iranian organisations and individuals suspected of evading previous sanctions, or supporting terrorism.

“This caught everyone by surprise. Nobody expected new sanctions after progress was made in July,” a major Dubai-based polymer buyer said.

International sanctions on Iran were partially lifted for a period of six months from 20 January after the Middle Eastern country agreed to limit its uranium enrichment program, thus easing international concerns that the country may be building a nuclear weapon.

The six world powers – US, France, China, Russia, Germany and the UK – pledged not to impose new sanctions on Iran under the deal reached in Geneva in November 2013.

Failing to come up with a comprehensive accord on 20 July, the negotiations were extended by four months to 24 November.

On 29 August, however, the US cited resistance from Iran’s military to open its nuclear program for deeper inspections, in announcing fresh sanctions on Iran.

Iranian President Hassan Rohani was quoted in media reports as saying that the new US sanctions are “illegal” and “incompatible with the spirit of current negotiations”.

“The new sanctions will upset Iran for sure. We are not sure when Iran will get back into the petchem market now,” the Dubai-based polymer buyer said.

Iran may adopt a more aggressive stance during negotiations following the new sanctions imposed by the US, said a separate petrochemical trader based in Dubai.

“Iran’s ego is bruised by the new sanctions. Tehran will likely adopt a tougher line [in the] upcoming talks,” the trader said.

Petrochemical players initially harboured hopes that the eventual full lifting of Iran sanctions would allow Iran to reclaim its major supplier status in the European market.

Iran aims to bump up its total petrochemical production to 100m tonnes/year by end-2015 from 60m tonnes/year in 2012, according to state-owned National Petrochemical Company (NPC).

Currently, Iranian producers are still unable to sell petrochemicals to their key export market, an energy trader said.

China and India, on the other hand, have helped provide sales avenues for Iranian petrochemicals, said a source close to a Middle East supplier.

“Iran cannot sell to Europe, so it looks to India and China. Buyers there like to purchase Iranian products because it is considerably cheaper,” the source said.

Meanwhile, the EU and the US may be too distracted for the time being by Russia, on which they are mulling imposing new sanctions, industry sources said.

Russia’s annexation of Ukraine’s Crimea peninsula in March and the downing of commercial Malaysian Airlines flight MH17 that killed 298 people on 17 July over Russian rebel-held territory in Ukraine have been condemned by the international community.

“Attention is shifted away from Iran and now on Russia. With a full plate, the West may not consider Iran a first priority,” a Dubai-based distributor said.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

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