Iran fuel sanctions spell opportunities for traders

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Gasoline trade at the UAE port of Jebel Ali is likely to be disrupted by new sanctions against Iran.

Sanctions busting has proved lucrative in the past for the less scrupulous in the opaque world of oil trade, and could do so again if new US restrictions seek to limit sales into Iran.

Us sanctions against suppliers of fuel to Iran would drive up the price that the Islamic Republic has to pay for its imports, creating a money-making opportunity for oil traders able to flout the new restrictions.

"Oil flows are really determined by market forces rather than politics and that's the bottom line," said analyst Raja Kiwan of PFC Energy. "Politics can be an obstacle, but can't block the flow."

Iran is the world's fifth-largest crude exporter but its refineries lack the capacity to meet domestic fuel demand, so it imports up to 40 percent of its gasoline supplies.

The US and its allies may target those imports if Tehran continues to refuse to enter talks over its nuclear programme. The West suspects Iran aims to make nuclear bombs, while Tehran insists it needs fuel for power plants.

Analysts and traders said that the new sanctions would disrupt supply patterns, stop some suppliers and force Iran to pay more for sellers prepared to run the risk.

"Sanctions just make it more expensive and uncomfortable," said Al Troner, managing director of Asia Pacific Energy Consulting.

"That's what you saw with South Africa and to some extent with Saddam Hussein's Iraq. The flow would continue but players would take on substantial financial and political risk."

Higher import costs would impact Iran's budget, which could hurt president Mahmoud Ahmadinejad. Government subsidies make Iran's gasoline among the cheapest in the world. If imports cost more, more of the budget would be spent on those subsidies, leaving less cash to finance Ahmadinejad's populist programmes.

So even if the oil trade sidesteps the sanctions, the measures may have the impact that the US and its allies want.

Neta Crawford, a professor of political science at Boston University who studied the effect of oil sanctions against apartheid in South Africa, said even leaky sanctions in the country strained the economy and fractured the elites' hold on society.

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