of halting all purchases of Iranian crude next year, according to industry sources interviewed by the Reuters news agency.
Sanctions do not ban the purchases, but the firms say sanctions have made financial transactions with the Islamic Republic more costly administratively and politically.
The Portuguese oil company Galp is the sole European oil firm named by Reuters as considering a halt to purchases. But Reuters said it knew of one other firm also thinking of a halt.
Galp, a relatively small buyer of Iranian crude, scaled back its purchases earlier in 2010. While a decision on 2011 has yet to be made, an industry source doubted they would be continued. “I find any renewal very difficult, mostly due to political pressure,” the source told Reuters.
US companies have long been prohibited from buying Iranian oil, but firms elsewhere face no such ban. Traders, however, say it is harder to pay for Iranian exports in currencies such as the euro and the dollar and it may no longer be worth the bother to deal with Iran.
A source at a European oil company which now includes Iran as one of its main suppliers told Reuters its board would decide whether to renew purchases for 2011.
“We have some contracts up to December, and at the moment we are waiting for an indication from management for next year,” said the source.
He said decisions on renewing such contracts were normally taken at a lower level in the company, but, in the case of Iranian oil, technical and economic factors were only part of the picture.
“The delicacy of the situation suggests a decision at a very high level. It is not simple; it is a political decision.”
Trading data indicates European buys of Iranian crude surged in the spring before the new UN sanctions, but have dropped off since then, even though none of the new UN, US or EU sanctions say anything about crude oil purchases.
The issue appears to be two-fold. First, the US banking restrictions that were started five years ago and that are getting tighter with each passing month are making it difficult to do any kind of business with Iran. Second, the Islamic Republic has become such a pariah that many firms fear a loss of reputation if they continue to do business with Iran.
Data from the International Energy Agency, a grouping of 28 industrialized oil importers, show the amount of Iranian crude heading to IEA members in Europe surged to 1.2 million barrels per day (bpd) in July, more than double the year-earlier figure.
Italy’s imports of crude from Iran jumped in the first seven months of 2010. The buying gathered momentum just before new sanctions took effect over the summer.
Some Italian banks are still willing to handle transactions on Iranian crude, an industry source told Reuters.
But an industry source said the amount of Iranian crude coming to Europe has declined to around 550,000 bpd so far in October, less than in September and August, while supplies to Asia have been increasing.
Among global oil companies based in Europe, Royal Dutch Shell has maintained crude trade with Iran and has received financing help from Chinese banks, a trading source told Reuters in September.