Iran talks tough terms for top Asian crude buyers

NEW DELHI/BEIJING - Reuters

Iran is trying to sell its biggest Asian customers oil at higher prices and on tougher terms, even as it faces the prospect of fewer sales as Western nations mull sanctioning the economic lifeline of the world’s fifth largest crude exporter.

If Iran gets its way, fresh deals to Asia’s refiners would mean more oil revenues to cushion the impact of possible sanctions by the European Union and others to punish it for its nuclear program.
It’s no surprise Iran has taken a tough line on supply terms, as it pumps nearly 2.5 percent of global supply. Oil sales provide about half of its budget revenues.

China is Iran’s biggest oil buyer, taking over half a million barrels per day (bpd) and has the capacity to take more. Beijing is also Iran’s biggest trade partner and has worked to keep oil out of U.N. sanctions.
There is no sign, however, Iran is using oil to keep China sweet. After weeks of talks, frustrated Chinese negotiators who had hoped to take advantage of the international political pressure on Iran still have no 2012 supply deals.

Iran wants China’s state-run Sinopec, Asia’s largest refiner, and state oil trader Zhuhai Zhenrong Corp, to pay more, and faster, than in 2011, sources familiar with the talks said.

Iran believes its terms for 2011 were too generous, and now wants to reduce the credit grace period for both Chinese buyers to 60 or 30 days, the sources said.

Sinopec, however, wants to get the best deal out of Iran, given the “difficult situations” it now faces, a Chinese refinery source said. The Chinese buyers currently have 60 and 90 days to pay Iran for its oil.
Iran’s insistence on speedy payments was in part prompted by this year’s debacle in India, its second largest buyer.

Refiners bought billions of dollars worth of oil but were suddenly unable to pay for it legally after the central bank caved in to Western demands and stopped clearing payments.