World’s commodity trading houses have their sights set on Iran thaw

Published Apr 22, 2015

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Javier Blas London

THE world’s largest commodity trading houses are first in line to profit from the much expected return of Iran to global markets as Tehran and Washington enter into the final three months of nuclear talks.

While the global oil industry has been seen as the biggest beneficiary of a thaw, commodities’ traders including Cargill, Glencore, Vitol, Trafigura and Louis Dreyfus Commodities have a long history in Iran, helping to export its oil and import daily basics like gasoline, wheat and rice.

The US and European sanctions, designed to stop oil and gas trading, are also limiting the traders’ ability to sell food commodities, because of banking and shipping restrictions.

With a population of almost 80 million and the prospect of strong economic growth once sanctions are lifted, Iran offers one of the world’s biggest trading opportunities.

“We like other people have talked to the Iranians,” Vitol chief executive Ian Taylor said. “They used to be major players in the markets, but obviously none of us will do anything unless sanctions are actually lifted.”

Iran is not only a large crude oil and fuel oil exporter, but has been historically a sizable importer of gasoline, and it is among the world’s top four buyers of wheat, barley and rice, and one of the 10 largest importers of raw sugar.

“The whole industry is looking at the talks with Iran,” Swithun Still, director of Solaris Commodities, a Switzerland-based grain trader, said. “If the sanctions are lifted, commodities would be the first thing that would move.”

The importance of Iran to grain traders is such that Cargill and Dreyfus have both employed lobbyists in Washington to press the issue, according to US Senate disclosures. Seaboard, a US-based conglomerate that is a top rice trader, and a smaller competitor Phoenix Grain also used lobbyists.

The trading houses largely stopped dealing with Iranian oil and refined products in 2012 and 2013 after the US and Europe introduced their most recent set of sanctions.

Before, Vitol, Trafigura and Glencore were regularly among the top five suppliers of gasoline to Iran, according to industry estimates.

The trade of food commodities is exempted from sanctions and has continued.

Glencore, for example, sold agricultural commodities worth $162 million (R1.95 billion) last year to Iran, according to public disclosures.

But that is only a quarter of the $659m the trading house exported two years ago, as grain traders find it increasingly difficult to supply Iran with food commodities due to banking and shipping restrictions.

Now, commodity trading executives say they are again on the lookout for Iran opportunities. – Bloomberg

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