Buying Refinery Shares an Alternative to Blocked Oil Revenues

Buying Refinery Shares an Alternative to Blocked Oil RevenuesBuying Refinery Shares an Alternative to Blocked Oil Revenues

Iran's former OPEC governor called on the parliament and the government to authorize the purchase of European refineries' shares with the purpose of securing demand for Iranian oil when sanctions are lifted.

In view of growing competition among some Arab members of the Organization of the Petroleum Exporting Countries, non-OPEC producers and Russia to gain market share, Iran will face serious hurdles in making a strong comeback into the global oil market.

Buying shares or buidling refineries in other countries can guarantee long-term demand for Iranian oil, Seyyed Mohammad-Ali Khatibi was quoted by Mehr News Agency as saying. Iran can purchase shares in lieu of debts owed by refineries for previous oil purchases, which were not reimbursed due to the sanctions imposed against Iran.

"Acquiring more than 50% of an oil refinery's shares will not only reinforce Iran's bargaining power for long-term export of its crude, it can also provide the country with much-needed petrochemical products," Khatibi said.

In order to embark on such an initiative, however, the Oil Ministry needs to obtain authorization from the Cabinet and the parliament.

As Iran's energy and financial sectors were strictly restrained by sanctions, the private sector made comprehensive planning to purchase shares of a French refinery, but despite the fact that all legal and financial arrangements were made in France, the French Foreign Ministry foiled the plan at the final stage, Khatibi said, without providing details of the refinery.

According to Wall Street Journal in July 2012, Tadbir Energy Development Group had unsuccessfully bid on the Petit-Couronne refinery in France. Another WSJ report published in April suggested that Iran’s Ghadir Investment Company has sought to buy a refinery in Switzerland controlled by the oil company Tamoil Suisse, which despite its name is based in Libya. Acquiring such strategic assets in other countries gives the government invaluable leverage to keep Iranian oil flowing at a reasonable price.

"Lifting of sanctions will pave the way for Iran to purchase shares of refineries across the globe, especially refineries that are behind with their payments to Iran, such as Greek refineries," Khatibi said.

Currently, Greek refineries, British-Dutch-owned Shell refineries, BP, South Korean Petrochemical and Polymer Company, along with Indian refineries top the list of Iran’s oil debtors. Iran’s unsettled financial dues for oil export are estimated to stand at $20-25 billion.

Iran had previously owned shares of several refineries in India, South Korea and South Africa, but over the past few years it sold all its assets, with the exception of a small refinery in India.

The US and its allies imposed tough sanctions on Iran to curb the country's nuclear program which they claim is geared to military use. Iran insists its program is peaceful. Iran and the P5+1 group ( five permanent members of the UN Security Council, namely United States, Russia, China, United Kingdom, and France, plus Germany) have been holding marathon talks over the past year to thrash out a mutually acceptable "comprehensive deal."

Following eight days of marathon talks on Tehran's nuclear program in the Swiss city of Lausanne, Iran and P5+1 reached a framework agreement on April 2 that calls for lifting all trade sanctions against Iran. The details of the agreement are to be finalized by the June 30 deadline.