U.S. Firm Gets OK to Import Oil From Iran
Signaling a possible break in the economic isolation of Iran, the U.S. Treasury Department has issued the first license to import oil from the Islamic republic since Congress imposed sweeping trade sanctions in 1987.
The license was granted this week to the Coastal Corp., a Houston-based energy firm whose controversial chairman, Oscar Wyatt, has long maintained ties with Iran, Iraq and other oil-rich nations that have been shunned by the West. Coastal confirmed receipt of the license Tuesday.
San Francisco-based Chevron Corp., meanwhile, said that it is close to its own deal to import Iranian oil and that it applied for an import license Tuesday.
The two deals likely won’t be the last as Iran tries to build new bridges to the West and win back U.S. customers while Iraq’s and Kuwait’s oil industries remain crippled in the wake of the Persian Gulf War, energy observers said.
Issuance of the Coastal license signals a shift in U.S. policy toward Iran in the wake of the Middle East crisis, analysts said. Last fall, the White House quietly loosened its restrictions against importing Iranian oil, and the Coastal license was apparently the first granted under the new policy.
With Iraq knocked out of petroleum production, Iran is the second-largest producer of crude oil in the Middle East, after Saudi Arabia.
Barbara Clay, a spokeswoman at the Treasury Department, said five to 10 other applications for import licenses are under consideration.
She declined to name the companies involved. But the newsletter Petroleum Intelligence Weekly reported Monday that Texaco Inc., Gulf Oil Trading Co., Enron Corp., Phibro Energy Inc. and others are negotiating deals as the Iranian freeze begins to thaw.
Officials at Texaco, Enron and Phibro played down the speculation, saying that no deals are pending. Gulf officials could not be reached for comment.
On Tuesday, however, Coastal spokeswoman Barbara Johnson confirmed that the company has won a license to import 2.5 million barrels of oil from Iran.
The license requires that Coastal deposit the purchase price in an account set up to repay claims against the Iranian government. The claims stem from the seizure of U.S. assets after the 1979 Islamic revolution and subsequent hostage crisis--claims now being adjudicated by an international tribunal at The Hague.
Coastal would not detail the terms of its contract with Iran. But the Iranian oil is a light grade comparable to Saudi Arabian crude, which brought about $17.95 a barrel last week, including transportation, upon delivery at the U.S. Gulf Coast, according to Thomas E. Wallin, group editor at Petroleum Intelligence Weekly. Iranian oil is being priced at or slightly below the Saudi grade for competitive purposes.
Chevron, similarly, plans to import between 1 million and 3 million barrels of Iranian crude, spokeswoman Jan Bayles said in New York. “We don’t really have a deal at this point; however, we consider we have a tentative agreement and are very close to a deal,” she said.
The oil deals are a sign of Iran’s new desire to forge new links with the West 12 years after the revolution and hostage crisis sundered relations with the United States, observers said. Back then, President Jimmy Carter imposed an embargo on imports of Iranian crude, and Iran ordered a cutoff of oil shipments to American firms.
Trade restrictions eventually loosened. But in 1987, Congress enacted a sweeping trade embargo in response to word that Iran was using U.S. dollars to finance its assault on Persian Gulf shipping at the height of the Iran-Iraq War.
Now, Iran--which boosted production during the most recent Gulf crisis to make up part of the shortfall of crude oil from Iraq and Kuwait--wants to eventually increase its crude output from the current 3 million to 3.5 million barrels a day.
To do so, the country needs markets and Western partners--and the United States remains the world’s largest crude oil market, analysts note.
“There has been a genuine, fundamental and I would say irreversible change of heart on the part of the Iranians,” said Fereidun Fesharaki, a pre-revolutionary energy adviser to the Iranian government and now head of energy research at the U.S. government-funded East-West Center in Honolulu.
“These are not new people; these are the same guys who have decided the old ways did not work and have changed their minds,” he said. “They want to survive as political people, and the only way is by making the economy work.”
As a sign of Iran’s eagerness to re-enter the U.S market, the government sponsored an international oil conference in the resort city of Esfahan last month for U.S. companies, oil ministers from the Organization of Petroleum Exporting Countries and others. The meeting was a lavish “coming-out party” at which the Chevron deal--among others--was discussed, said a source who attended the conference.
“If you don’t have the U.S. as one of your markets, your flexibility to negotiate or bargain with customers in Europe or Asia is highly restricted,” said Vahan Zanoyan, a senior director at the Petroleum Finance Co. in Washington.
The United States imports about half of the 16 million barrels of oil it uses daily--the most of any nation. Before the war, its main sources included Iraq and Kuwait; since then, it has had to rely on alternative sources.
The deals will put Iran into competition with Saudi Arabia, currently the leading force within OPEC.
“The oil-exporting countries are engaged in a fairly gentlemanly game of acquiring market share. But it’s real, nevertheless,” said economist Philip K. Verleger Jr. of the Institute of International Economics in Washington.
