Reliance Industries Limited (RIL) has ceased exporting petroleum products to Iran in line to hold off possible limitations on sales to the US market. RIL was exporting 2% of its total production, worth about $280 million, from its two refineries in Jamnagar to Iran. The gasoline exports to Iran were halted in May 2009. RIL exports petroleum products worth $14 billion yearly, of which about 5% is exporting to US.
RIL spokesperson said: “As a policy, we do not comment on specific customers or markets.”
In April 2009, a group of 25 senators had announced a bill in the US Congress that aimed to penalize firms that provide oil products to Iran. The proposed penalty included an prohibit on conducting business in the US. Apart from RIL, international oil firms, such as Royal Dutch Shell plc and Bp plc, are also facing pressure from US lawmakers. Previously in December 2008, a group of US lawmakers had asked Exim bank to suspend assistance of $900 million to RIL.
This has played a vital role in RIL’s eventual decision to halt the sale of petroleum products to Iran, since Exim bank has financed exports of capital equipment used in oil exploration activities in the Krishna-Godavari (KG) basin, where RIL has made a number of gas discoveries. RIL’s exports to Iran have been erratic since December 2008.
Iran has been locked in a tense stand-off with the US and its major western allies over its alleged ambitions to build nuclear bombs. The UN Security Council has levied a restricted set of sanctions, penalizing Iranian individuals and entities connected to the alleged nuclear programme. Over and above this, the US, particularly under the Bush Administration, has been pressuring financial institutions and companies to halt doing business with Iran. In the recent past, the Obama administration has sought a dialogue with Iran to cease its alleged bombmaking activities.
US pressure on India is also widely thought to have stalled India’s intentions to join the much-hyped multi-billion Iran-Pakistan-India (IPI) pipeline. In May 2009, Iran signed the IPI pipeline project contract with Pakistan. Analysts say that the improvement in relations between India and the US over the civil nuclear contract had made it more difficult for RIL to continue exports to Iran. “The Indian government does not support private companies in geo-political issues compared to their public sector peers, which have a (greater degree of) government backing.
There is also pressure on US-based fund houses to pull out of investments in Indian energy firms, if they continue business relations with Iran,” said an analyst with international brokerage firm.
Presently, the major sources of gasoline to Iran are UAE, which provides 80% of Iran’s imports. The other alternatives of gasoline to Iran are Turkey, Spain, France, Azerbaijan, Turkmenistan, Singapore and the Netherlands. Iran imports a substantial amount of refined products, as it does not have sufficient refining capacity. Iran is in process of increasing refinery capacities, so that it may not have to rely upon imports.