financing for Iranian oil buys, becoming the last Italian bank to bow to pressure from the United States and cut ties with the Islamic Republic, Reuters quoted trading sources as saying Monday.
Purchases of Iranian crude are not banned by any of the American, EU or UN sanctions, except that Americans have not been allowed to buy Iranian crude—or anything else Iranian—for 15 years. But US sanctions do not threaten to punish foreigners who buy Iranian crude.
What’s happened is that crude purchases are being crimped in the West by the US Treasury’s pressure on international banks.
The US Treasury’s banking campaign has proven to be far more harmful to Iran than all the American, UN and European sanctions combined. The US Treasury has used its financial clout—and the might of the US dollar—to lean on banks all around the world to cease doing business with Iran.
Most foreign banks do far more business with the United States than Iran, and don’t want to risk their American business. Even those that don’t care about doing business in the United States conduct transactions in the US dollar and are thus subject to pressure from the US Treasury.
The banking campaign was started in 2005 when Stuart Levey was named undersecretary of the Treasury with a mandate from President Bush to throttle Iran. He did such a good job, that he was one of the few Bush appointees that President Obama kept on.
Intesa SanPaolo declined to comment when contacted by Reuters. But a trading source told Reuters, “They have stopped from last month. They were the last Italian bank available for Iranian crude. I guess people will have to look elsewhere for financing now. Maybe China. But it is getting more and more difficult.”
Reuters said two other trading sources confirmed the development.
Italian and Spanish firms as well as Royal Dutch Shell remained among regular buyers of Iranian crude this year but many traders say the volumes may shrink next year under pressure from the international community.
“Business is continuing, but much less than before,” said a crude trader with a European oil company.
Italian energy major ENI has said it will continue to receive Iranian crude for at least another three years. But ENI isn’t paying for that oil; Iran is sending ENI that oil as payment for an oilfield development ENI has finished in Iran.
Saras, an Italian oil refiner, said last month that transactions with Iran have become more challenging as banks are reluctant to get involved.
There is little publicly available data on the buyers of Iranian crude. But according to the International Energy Agency, which represents 28 industrialized countries, shipments to IEA member-countries in Europe fell in September.
Exports of Iranian light crude to European IEA members have fallen to 180,000 bpd in September from 400,000 bpd in July, according to the IEA. Even so, September exports were slightly up year-on-year, probably reflecting recovery from the Great Recession.
Supplies of Iranian heavy crude to Europe declined to 660,000 bpd in September from 800,000 bpd in July. Shipments were also up year-on-year, rising from 440,000 bpd in September 2009.