Swiss oil trader buys Iranian fuel, sells to China bypassing sanctions

SINGAPORE/BEIJING -Reuters

An employee fills the tank of a car at a Sinopec gas station in Huaibei, Anhui province in China, Sept 9. Vitol, the Swiss-based oil trader shipping Iranian oil to China, earned a record revenue of $297 billion in 2011. REUTERS photo

Vitol, the world’s largest oil trader, is buying and selling Iranian fuel oil, undermining Western efforts to choke the flow of petrodollars to Tehran and put pressure on Iran’s suspected nuclear weapons program.

Vitol last month bought 2 million barrels of fuel oil, used for power generation, from Iran and offered it to Chinese traders, Reuters established in interviews with 10 oil trading, industry and shipping sources in Southeast Asia, China and the Middle East. A spokesman for Vitol declined to comment.

Swiss-based Vitol is not obliged to comply with a ban imposed in July by the European Union on trading oil with Iran because Switzerland decided not to match EU and U.S. sanctions against Tehran.

The company earlier in the year stopped trading Iranian crude oil from its main European offices before the July 1 EU embargo deadline. But the trading sources said it has continued to deal in Iranian fuel oil from the Middle East.

The tale of the cargo of Iranian fuel oil involves tanker tracking systems being switched off, two ship-to-ship transfers, and blending of the oil with fuel from another source to alter the cargo’s physical specification.

Privately-held Vitol SA is led by its long-time CEO Ian Taylor, a Briton. Taylor was among leading donors to Britain’s ruling Conservative Party named in March by the Prime Minister’s office as having dined with David Cameron at his private apartment in Downing Street amid the fall-out from a “cash for access” party funding scandal. Britain is a vociferous critic of Tehran’s nuclear program and a leading advocate of the EU sanctions.

Vitol has said previously it is in compliance with sanctions against Iran, but has declined to say whether or not it would follow the strict EU regulations rather than Switzerland’s.

Rival Swiss-based traders Glencore and Trafigura said in July they had halted all Iranian oil trade, even though the Swiss government opted against following measures imposed by Washington and Brussels.
The measures have halved OPEC member Iran’s crude oil export revenues, devaluing the rial currency and bringing financial hardship to millions of Iranians.

On top of the EU ban, Iran’s four biggest oil buyers - China, India, Japan and South Korea - have
reduced their imports by at least a fifth to secure exemptions from the threat of U.S. financial sanctions on their companies.

Vitol earned record revenues last year

Vitol last year earned record revenue of $297 billion, a near-five-fold increase since 2004. It does not reveal profits.

Fuel oil is a small part of its trading portfolio, accounting for $24 billion of revenue last year compared to $105 billion from crude and $100 billion from other refined products.

Profit margins on oil trade are typically very low, but traders said Iran’s difficulties in finding buyers because of sanctions are likely to have made for a fat profit margin for trading its fuel oil.

Vitol acquired the Iranian fuel oil early this month in a ship-to-ship transfer off Malaysia from a National Iranian Tanker Company (NITC) vessel, the Leadership, onto a Vitol-chartered tanker, the Ticen Ocean.
The Ticen Ocean was sub-contracted by Vitol for floating storage off the Malaysian port of Tanjung Pelepas from Titan Petrochemicals.