The International Atomic Energy Agency (IAEA) voted 25-3, back on November 27, to censure Iran over its uranium enrichment programme. In turn, the IAEA's vote prompted the US, which has long been pushing for the imposition of sanctions against the Ahmadinejad regime, to restate its end-of-year deadline for Iran to respond to international demands to halt enrichment and allow more complete inspections of its nuclear facilities. Following this, on December 15 the US House of Representatives voted 412-12 in favour of the Iran Refined Petroleum Sanctions Act. If the act is passed by the Senate, it will not only bring in the most wide-ranging and harsh sanctions against Tehran to-date, but it will also hit the local oil industry hard.
The legislation would impose tight regulation on companies investing over $20 million in Iran's oil industry, and extend sanctions to oil pipelines and tankers. It would also involve the imposition of new sanctions on entities involved in exporting certain refined petroleum products to Iran, or building Iran's domestic refining capacity.
Despite holding some of the world's largest crude oil reserves (137.6 billion barrels), and second only to Saudi Arabia, Iran has struggled to meet growing domestic demand for fuels owing to the burden of subsidies and inadequate refining capacity. Subsequently, the country remains reliant on refined product imports.
Under existing sanctions, only US companies are prohibited from exporting gasoline to Iran. Fuel suppliers based elsewhere, including those headquartered in European countries which are allied with the US, continue to supply Iran. The trading arms of Royal Dutch Shell and France's Total both sold gasoline cargoes to Iran for October delivery. Interestingly, Chinese-based Zhuhai Zhenrong, which is the single largest corporate buyer of Iranian crude, has also been shipping a couple of gasoline cargoes to Iran per month for the last year or so. As recently as September of this year, Chinese state-owned oil companies started selling petrol via intermediaries to Iran. Chinese companies including Sinopec and PetroChina are currently supplying between 30,000-40,000 barrels per day (bpd) of petrol to Iran, making up around a third of the country's total gasoline import requirements.
Whether or not non-US companies will stop exporting gasoline to Iran as a result of US sanctions is dependent upon several factors. The main determinant being whether a company is keen to stay on the right side of the US politically. Many suppliers that are less susceptible to the US sphere of influence, however, will no doubt continue to export fuels to Iran. In addition, even as some companies cease trading with Iran, others will no doubt step in to fill the void left by their departure.