Shell Struggles To Pay Iran $1 Billion In Oil Debt
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Global oil giant Royal Dutch Shell Plc is facing difficulty in paying off the National Iranian Oil Co (NIOC) for nearly $1 billion in crude oil deliveries, said a report by Reuters on Sunday, after EU and US financial sanctions on Iran severely restricted any forms of payment to the Islamic state.
Global oil giant Royal Dutch Shell Plc is facing difficulty in paying off the National Iranian Oil Co (NIOC) for nearly $1 billion in crude oil deliveries, said a report by Reuters on Sunday, after EU and US financial sanctions on Iran severely restricted any forms of payment to the Islamic state.
According to numerous industry sources, Shell is the second largest corporate client of Iran’s, behind Turkey’s Tupras, and have contract delivery volumes of 100,000 barrels per day; and while its CEO Peter Voser said on March 7 that the company would take its final deliveries of Iranian oil “within a matter of weeks”, the oil firm is still believed to owe NIOC payment for nearly 8 million barrels of oil.
[quote]”Shell is working hard to figure out a way to pay NIOC,” said an industry source to Reuters, who requested anonymity. “It’s very sensitive and very difficult. They want to stay on good terms with Iran, while abiding by sanctions.”[/quote]These sanctions include a region-wide ban from the European Commission on Iranian oil, which began on January 23 – though the Commission has given companies until July 1 to end their existing contracts.
But companies such as Shell have also been hindered by financial restrictions placed on Iranian banking systems, which have made it “nearly impossible” to make any final payments to Iran.
[quote]”There are big frustrations with the payment route – the US pressure is really working,” said a senior oil source. “It’s now nearly impossible to use the banking system.“[/quote]
On March 15, the Society for Worldwide Interbank Financial Telecommunication, or Swift, claimed that it had been instructed to discontinue all communications services to Iranian financial institutions that were subject to European sanctions.
“This EU decision forces Swift to take action,” said Swift’s CEO Lázaro Campos, as cited by the International Business Times. “Disconnecting banks is an extraordinary and unprecedented step for Swift. It is a direct result of international and multilateral action to intensify financial sanctions against Iran.”
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According to Reuters, some senior oil executives now believe that the only way forward for Shell is to ask the British government for help in settling the account with Iran.
Shell, along with other European rivals such as Total and Italy’s Eni, have long built oil partnerships with Iran, though they now cannot afford to put their businesses in the rest of the world at risk.
While these oil companies may be reluctant to burn bridges with Tehran, they also know that they have little option but to abide by the international sanctions lest they face sanctions on their own.
