Would Iranian Oil Sanctions Dent ENI?

WSJ

Europe may be pressing ahead with plans to slap an oil embargo on Iran, but the plan certainly won’t be plain sailing.

Italian energy major Eni’s admission Thursday that it is concerned about a potential ban on Iranian crude imports complicating payments it receives in oil shipments from the Islamic republic is another spanner in the works for Europe’s plans.

Many fear an E.U. Iranian oil ban will be counterintuitive: why push up the price of oil even higher and create more pain for consumers in debt-laden Europe already burdened by higher taxes and economic pain?

In October, Iran produced 3.5 million barrels a day out of total OPEC production of 30.0 million barrels a day, according to the International Energy Agency.

So, how much of a dent financially would oil sanctions have on such a major exporter, one of the largest in the world?

Certainly, an oil embargo is failing to garner much support with big energy players outside Europe. Russia, itself a large crude exporter to Europe like Iran, dismissed the idea in Doha this week, saying political restrictions on oil trade are generally unwise.

Total’s chief executive Christophe de Margerie downplayed oil sanctions too, and said it would not have a major impact on Iran because its exports would find their way to Asia if they couldn’t go to Europe.

The E.U. reckons there is consensus among its members for an embargo but it could have a job drumming up support elsewhere.

But Eni’s fears add a legal caveat to the E.U.’s plan to tighten the financial screw on Tehran. Iran is paying off Eni in crude cargoes for previous work done by the Italians in the country. Eni CEO Paolo Scaroni very much hopes any E.U. ban on buying Iranian crude would still allow Eni to receive oil payments from Iran, but he isn’t sure.

“We are a little bit more worried about the payments of crude that NIOC are making to us for our previous activities,” Mr. Scaroni said. “We feel that this will be exempt from any ban. We feel there is a difference between importing crude and receiving crude.”

With nearly $2 billion outstanding in crude shipments it’s small wonder Mr. Scaroni is a little worried. ‬