Vitol clinches $1 billion oil deal with Iran

LONDON/DUBAI: The world’s largest oil trader, Vitol, has clinched a deal with the National Iranian Oil Co (NIOC) to loan it an equivalent of $1 billion in euros guaranteed by future exports of refined products, four sources familiar with the matter said.

The pre-finance deal is the first such major contract signed between Iran and a trading house since sanctions were lifted in early 2016. Vitol and NIOC declined to comment.

It highlights the speed of the oil industry recovery in Iran just a year after lifting of sanctions.

It also re-establishes some old dealings with Western firms as Tehran is benefiting not only from easing of EU sanctions but also from reduced US restrictions on its access to dollars, which Iran needs to reignite its economy.

Foreign companies still tread carefully for fear of breaking a myriad of complex laws, and oil majors such as Shell, BP and Eni have been slow to return as regular crude lifters.

Executives who are US citizens are often ring-fenced from negotiations with Iran, notably BP’s CEO Bob Dudley and even those working for non-US companies.

Traders have increasingly turned to pre-finance in recent years to secure long-term access to large volumes of oil and products — the system of pre-finance by large traders including Vitol has for example kept the Iraqi region of Kurdistan afloat during its war with IS in the last two years.

The Vitol-Iranian deal was signed in October and will come into effect this month, one of the sources who is based in Tehran said.

“It is in euro... with the interest rate of around 8 per cent in exchange for oil products,” the source said, adding that some products could be supplied by the private sector rather than NIOC.