Reliance, others withdraw from Iran, but China replaces them

Several US lawmakers - both from the House of Representatives and the Senate - had in the past raised question over Reliance's business ties with Iran and had urged the Export Import Bank of the US to rescind loan guarantees to Reliance. "India's Reliance has been a major supplier of gasoline to Iran. However, in January 2009, Reliance reportedly agreed to terminate gasoline sales to Iran once its current contractual obligations expire," said a latest report of the Congressional Research Service (CRS).

CRS is the independent and bipartisan research wing of the US Congress that prepares periodic report for US lawmakers on issues of their interest. "Previously, some Members of Congress called on the US Export-Import Bank to rescind two loan guarantees worth USD 900 million authorised to RIL, in support of RIL's petroleum refinery equipment and services (USD 500 million) and for gas development and exploration in India's Bay of Bengal region (USD 400 million)," the report said.

In fact, Reliance is not the only company to have terminated its gasoline supplies to Iran, the CRS report said. "The Swiss-based wholesalers Vitol, Glencore, and Trafigura have been longstanding suppliers of gasoline to Iran. While they reportedly sold gasoline to Iran in 2009, these companies have since stopped shipments due to the mounting political and commercial risks of doing business with Iran," it said. "The termination of shipments follows a trend in recent years of scaling back business with Iran. For instance, in December 2007, Vitol reportedly declined to renew long-term contracts with Iran, but still provides gasoline to Iran on the spot market," it said.

"In the first half of 2010, Malaysia's Petronas, Russia's LUKOIL, and Royal Dutch Shell reportedly stopped selling gasoline to Iran. "Iran's longtime suppliers of gasoline from Europe are being succeeded by smaller Dubai-based and Chinese companies," it said, adding that China's ZhenHua Oil, which began selling gasoline to Iran in 2009, reportedly now provides Iran with one-third of its gasoline imports.

"A number of factors contribute to Iran's high gasoline consumption rates. Many analysts contend that high energy subsidies do not give Iranians an incentive to conserve. In addition, there has been an increase in vehicle sales, particularly of fuel-inefficient older models. Import levels are also high because Iran has limited domestic refinery capacity to produce light fuels," the CRS said.

Some analysts predict that Iran could become a net exporter of gasoline by 2013 if the government achieves its targets for domestic gasoline refinery projects and eliminates gasoline subsidies. Oil consumption also is declining as consumers are moving more toward natural gas use.

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