November 08-2013
The Oil Ministry announced last Wednesday that it plans to resume oil swaps with its Caspian Sea neighbors in the near future.
This announcement, however, conflicted with earlier announcements, but the Oil Ministry gave no explanation.
Under oil swaps, which began a dozen years ago, Iran’s Caspian neighbors deliver oil to the port of Nekka on the Caspian coast. Iran uses that oil in its northern refineries and distributes the products across northern Iran. Meanwhile, it sells an equal volume of crude in its Persian Gulf terminals to the credit of its Caspian neighbors.
The arrangement saves both countries money. Iran does not have to pay to transport crude all the way across Iran from its southern fields. And the Caspian neighbors don’t face the cost of transporting their crude to a coastal terminal.
Last Wednesday, the managing director of the National Iranian oil Company (NIOC), Rokneddin Javadi, announced that the required infrastructure was being prepared in the Caspian so that oil swaps could soon be resumed.
But as recently as last May, the head of the National Iranian Oil Products Distribution Company under the previous administration, Mostafa Kashkouli, said oil swaps were booming and he planned to raise the volume of such swaps in the current Persian year to 130,000 tons from 100,000 in the previous Persian year.
In June 2009, however, the government announced it was halting oil swaps. But in June 2010, Deputy Oil Minister Ahmad Qalehbani insisted Iran had never halted them.
As happens very often, regime officials make conflicting statements and never bother to explain the discrepancies.
Part of the problem appears to be the fee that Iran charges its northern neighbors for its service. Qalehbani made the point in June 2010 that Iran wanted more money for engaging in oil swaps—which was the point Deputy Oil Minister Hossain Noqrekar Shirazi made in June 2009 when he announced the suspension of oil swaps.
Qalehbani said in June 2010 that while Iran had not suspended oil swaps it would do just that unless it was paid $5 to $6 for each barrel of crude swapped.
Under the oil swap arrangements, Azerbaijan, Turkmenistan and Kazakhstan have each provided Iran with some crude oil over the years.
But in June 2010, Qalehbani implied that oil swap sales were a pain. He said to continue them the Central Asian states delivering crude to Iran in the north would have to sell the oil Iran exchanges with it in the Persian Gulf and not expect Iran to handle the marketing.
And that would be doubly true now that Iran is under sanctions. Last week, Kashkouli said nothing about who would market the oil in the Persian Gulf. Nor did he say anything about the fee charged by Iran.
The production companies that had the oil swap deals with Iran were Dragon Oil, Vitol, Select Energy and Caspian Oil Development. Other sources have said that the oil companies stopped swapping because the higher fee Iran wanted to charge made the swap arrangements unprofitable.
Many in the Majlis operate on the assumption that slick foreigners routinely cheat and trick Iran and criticize almost every contract Iran has signed with foreign firms.
