Attempting to counteract Western sanctions on Iranian oil exports, the Iranian government has extended easier credit terms to Asian oil buyers. Asian countries are collectively the biggest buyer of Iranian crude, accounting for about 65 percent of Tehran’s sales.
The Financial Times reported yesterday that Tehran has been offering a handful of potential customers in Asia 180 days of free credit, citing unnamed industry sources.
The credit terms amount to a discount of about 7.5 percent per $118 barrel.
Saudi Arabia, and other oil exporters in the Middle East tend to offer 30 days of credit, and Iran has in the past allowed importers such a China terms of 60 to 90 days.
The move comes after European Union nations, as well as Asian economies such as Japan, South Korea and China announced hefty cuts in their orders of Iranian oil.
Across the world, oil buyers are acting on the United States’ lead to cut financial ties with the Iranian state, or risk hefty US penalties.
Yet, despite the generous credit terms, the Financial Times said Iran was struggling to find buyers for its oil.
A senior Europe-based oil trader commented:
Obviously, the extra credit is the easiest way for them to offer a discount. However I think very few will be tempted.
This week, Iran’s president Mahmoud Ahmadinejad boasted that Iran ‘had so much hard currency’ that the country ‘will manage will even if we don’t sell a single barrel of oil for two or three years.’
But the International Energy Agency estimates that Iran’s oil production has fallen to a 10-year low, and fresh Western sanctions threaten to destroy Tehran’s oil industry.
Ever defiant, Iran’s official Press TV reported yesterday that the country plans to ban imports from 100 EU companies. Deputy President of Iran’s Trade Promotion Organisation Sasan Khodaei said the move is retaliation against ‘antagonistic measures’ by the EU.