National Iranian Oil Company Moves to Beijing Ahead of Embargo

SINGAPORE (Dow Jones) —National Iranian Oil Co. will move its top fuel oil trader to head its Beijing office next month just as Europe’s embargo against Tehran goes into effect, three people familiar with the matter said Thursday.

Traders said the move symbolizes Tehran’s reliance on China as the buyer of last resort when other customers are scurrying away due to the threat of sanctions. Besides crude oil NIOC is also eyeing the Chinese market to absorb its sizable fuel oil exports.

“It shows where the priority lies for Iran. China is its focus,” said one of the people.

M. Hojjati, currently NIOC’s Fuel Oil Marketing Manager, will be taking charge July 1, two of the people said, citing an email from Mr. Hojjati Thursday. He will oversee crude sales to China, NIOC’s largest customer, and may handle other products such as fuel oil as well, said the third person, with direct knowledge of the matter.

China has so far defied western sanctions that are aimed at hurting Iran’s oil revenues as a weapon to weaken Tehran’s stance on its nuclear program, something Western governments allege is a covert attempt to build a bomb. Tehran says its nuclear program is for peaceful purposes.

“China’s imports of oil from Iran is completely fair and reasonable and does not hurt third parties or the international community,” Chinese Foreign Ministry spokesman Hong Lei said at a daily press briefing Thursday.

The impending sanctions program is set to bring China into confrontation with the U.S. Washington has granted exemptions to several countries from sanctions, which target financial institutions doing business with Iran’s energy sector. However, Beijing has yet to get an exemption, and the deadline to comply with U.S. sanctions is June 28.

To make matters more complicated, a day after U.S. Secretary of State Hillary Clinton said Beijing appeared to be taking steps to reduce purchases from Tehran, Chinese customs data showed its imports from Iran were actually rebounding after a brief dip earlier this year because of a pricing dispute between the two sides.

Traders say Mr. Hojjati’s appointment will intensify NIOC’s efforts to find a market for its fuel oil exports, second only to crude. Its traditional buyers–traders and oil companies–are walking out the door one by one as sanctions make doing business with Iran more difficult. Royal Dutch Shell PLC (RDSB) has stopped buying crude and fuel oil from Iran, while trading giant Vitol Group is also expected to stop when the European Union sanctions take effect in just over a week.

“Vitol is and will remain in compliance with all applicable sanctions,” a spokesman for the company said without commenting on specific purchases from Iran.

The exit of other major buyers will leave the playing field empty for Zhuhai Zhenrong Co., China’s largest importer of Iranian crude oil, who’s also one of the few remaining buyers of NIOC’s fuel oil.

The U.S. has already imposed sanctions on state-run Zhuhai in January for allegedly exporting gasoline to Tehran over the last two years, but traders say the sanctions are unlikely to affect its business. Iranian fuel oil volumes could be easily absorbed in the Chinese market as marine fuel or a feedstock for its independent refiners, traders said.

Meanwhile, the current head of NIOC’s Beijing office is expected to move back to Tehran after a two-year tenure, one of the persons said. Mr. Hojjati will be succeeded by M. Sharifi as the head of the company’s fuel oil trading team in Tehran, he said in the email, a copy of which was reviewed by Dow Jones Newswires.

– By Gurdeep Singh, Dow Jones Newswires