Dubai fueled by cheap Iranian oil - US pressure

Dubai fueled by cheap Iranian oil – US pressure

U.S. officials are encouraging Dubai to find another source of supply. ENOC was asked to stop importing but it is still going on...

October 18, 2012 3:57 by Reuters

The United States and Dubai are negotiating an end to the emirate’s Iranian oil imports to head off the threat of U.S. President Obama sanctioning a trade that has riled Gulf Arab oil producers, industry sources and diplomats said.

Washington in the summer tightened controls on financial transactions for importing Iranian condensate, a light hydrocarbon, as part of U.S. efforts to starve Tehran of revenues for its disputed nuclear program.

But Dubai is still buying the oil while U.S. officials encourage the Dubai-government-owned Emirates National Oil Company (ENOC) to find another source of supply.

“The Americans did ask ENOC to stop importing but this is still going on,” a UAE oil industry source said of the continued imports by fuel-poor Dubai.

“We have discretion under executive order and we are working with UAE to ensure imports wind down,” a U.S. official said.

Iran’s condensate sales are its biggest source of income after crude and refined products, with Dubai its biggest buyer ahead of Asian buyers including China.

ENOC refines the condensate at Dubai’s Jebel Ali refinery to provide the city’s 2 million mainly expatriate, often wealthy, residents with cheap subsidised fuel at 1.72 dirhams, 47 cents, a litre.

U.S. and European sanctions have succeeded in cutting Iran’s crude exports by half this year, slashing oil revenues and piling pressure on Tehran to drop a nuclear programme that Washington and Brussels fear is designed to develop weapons.

But Dubai’s condensate imports from Iran are up nearly 20 percent from last year, according to estimates by some market analysts, with ENOC continuing to bring in Iranian supply in barter deals, Gulf industry sources familiar with the matter said.

Saudi Arabia, the world’s biggest oil exporter and a significant condensate seller, has complained that ENOC’s trade undermines sanctions against its OPEC rival Iran, a western diplomat said.

“The Saudis aren’t happy that another GCC (Gulf Cooperation Council) member is effectively supporting Iran and undermining sanctions and they’ve made their feelings known,” said the diplomat.