Following the decision of U.S. President Donald Trump to leave the nuclear deal with Iran, European refineries have started to reduce purchases of Iranian oil.
On May 8, Trump announced that his administration was withdrawing from the deal and re-imposing the old sanctions on Tehran.
Even though EU has emphasized its commitment to the deal, the European companies say they cannot risk their economic interests in the U.S. market by engaging in business with Iran.
An official from the Italian oil company Saras located on the island of Sardinia told Reuters, “we cannot defy the United States.”
“It is not clear yet what the U.S. administration can do but in practice we can get into trouble,” the unnamed official added and confirmed that his company is about to reduce its oil purchase from Iran and will end it within the time frame of 180 days set by the United States. The deadline will end on November 4.
Sources have told Reuters that companies such as Total of France, Eni of Italy, Repsol and Cepsa of Spain as well as Hellenic Petroleum of Greece are also moving toward halting purchases of Iranian oil.
These refiners have been purchasing one fifth of Iran’s exported crude oil. Iran has exported 2.5 million bpd crude oil in recent months.
European companies will continue purchasing Iranian oil only until the end of the deadline set by United States, the sources told Reuters.
On June 4, the foreign and finance ministers of Germany, France, and Britain, as well the European Union foreign-policy chief sent a letter to U.S. Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo, asking the United States to spare EU firms doing business with Iran from punitive measures.
However, French oil giant Total has not requested a waiver from the U.S. sanctions in order to continue crude oil trading with Iran after Nov. 4 and will stop Iranian oil purchase.
Eni has a contract with Iran for buying 2 million barrels oil per month that expire at the end of the year.
While Repsol and Hellenic Petroleum declined to provide any information about the future of their business with Iran, an official from Cepsa has told Reuters that his company will ask the U.S. government for permission to be able to continue its trade with Iran six months beyond the Nov. 4th deadline.
With the reinstatement of U.S. sanctions against Iran, European banks, insurance and shipping companies are distancing themselves from Tehran and therefore oil companies are unable to continue their business with Iran.
“It’s a matter of finding a tanker and an insurer that will cover it. It’s definitely not easy right now,” a source at Repsol told Reuters.
Another source said that the Swiss bank that was used by Hellenic Petroleum to buy Iranian oil does not cooperate with Iran anymore and therefore the company had to stop its purchase.