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SA treads Iran oil embargo tightrope

South Africa is assessing the impact of following the US and EU’s lead in imposing a ban on new contracts for crude oil and petroleum products from Iran, which would mean that South Africa’s oil refineries may have to carry out multimillion-rand reconfigurations if they are to wean themselves from an Iranian crude oil “diet”.

The Iran embargo saga is a political conundrum for South Africa, especially at a time when the country is serving as rotating chair of the UN Security Council.

The American aircraft carrier USS Abraham Lincoln transits the Indian Ocean. The ship sailed through the Strait of Hormuz and into the Persian Gulf without incident on Sunday, a day after Iran backed away from a threat to take action if a US carrier returned to the strategic oil route. Photo: Reuters. Credit: Reuters

Iran is South Africa’s principal supplier of crude oil and the ANC has long had close ties with the Iranian government. In the 1990s, the Mandela government offered to sell nuclear enrichment expertise to Iran, an issue of deep concern to the US, which believes Iran is poised to produce nuclear weapons.

South Africa has for years argued that embargoes against Iran should be dropped, believing its nuclear intentions were peaceful, but the country may have to review its stance given Iran’s sabre rattling in the Gulf in response to sanctions.

Nelisiwe Magubane, the director-general of the Department of Energy, said the government was still mulling its response to the imposition by the 27 EU foreign ministers of the embargo aimed at forcing Iran back to the negotiating table over the nuclear issue.

Magubane said her department would take direction ultimately from the Department of International Co-operation and Development (Dirco).

“We have done a quick assessment of the refineries that will be affected,” she noted, indicating this had been done by assuming that an embargo was placed by South Africa. The oil refineries are all run by private oil companies including Shell, BP, Sasol, Engen and Chevron. She confirmed that PetroSA, the state oil and gas company, did not import crude oil from Iran. “Modifications will cost anything up to R300 million to be able to reconfigure… to accept other crude oil diets”.

The department was investigating sourcing alternatives from other countries, including Saudi Arabia, Nigeria, Ghana and Angola, she said.

SA Petroleum Industry Association executive director Avhapfani Tshifularo confirmed that Iran was the biggest supplier of crude oil, accounting for about 29 percent of requirements. Magubane confirmed that it amounted to about 100 000 barrels a day.

The next largest supplier, at some 24 percent of the country’s needs, was Saudi Arabia.

Tshifularo said that it was probably best suited to the refineries’ configuration as it was drawn from the same region.

A Dirco spokesman, Clayson Monyela, referred all queries on the Iran issue to the Department of Energy. Magubane said the Treasury, the Department of Energy and Dirco would forge a policy position in due course.

Economist Iraj Abedian, who is also a special adviser to Mineral Resources Minister Susan Shabangu, said the crisis might provide South Africa with the opportunity to bargain for discounted crude from Iran, if it were to take a principled position to put pressure on the regime in Iran. “As a new Security Council member we carry the additional responsibility to anticipate the potential consequences for the global market and global security.”

“These are early days,” Abedian noted, indicating that the government had not taken a decision on how to respond to the dilemma. It might choose, like China and India, to get cheaper oil “and score financially while the going is good or take a principled position. Each may be justified in one way or another”.

PetroSA spokesman Thabo Mabaso and Central Energy Fund spokesman Mandla Tyala – who spoke on behalf of the Strategic Fuel Fund Association – confirmed that the state-owned companies did not store Iranian oil.

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