Glencore and Vitol fuel Greece after Iran oil ban

By Time of article published May 31, 2012

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Julia Payne and Emma Farge London

Debt-stricken Greece is surviving on oil priced at a premium from trading houses Vitol and Glencore, who have stepped in as suppliers of last resort after sanctions forced Greece to halt imports from its main supplier, Iran.

Greece has been forced to delay purchases of Iranian oil because of EU financial sanctions ahead of an oil embargo that takes effect on July 1. The timing could not be worse for Athens, which has become dependent on Iranian oil as most oil firms and banks will not extend it credit for fear of default.

Trading sources say Vitol and Glencore, the largest oil traders, have supplied most of the needs of Greece’s top refiner, Hellenic, in the past two months. The two companies have given Greece a combined e300 million (R3 billion) in open credit funds, allowing Athens to buy oil without payment guarantees from banks. Glencore has given credit for e200m and Vitol e100m.

That has allowed Greece to escape fuel shortages, but the rescue has come at a price because the trading houses are charging a hefty risk premium, according to traders at rival companies.

Vitol and Glencore declined to comment on their roles in Greece’s oil supply. Hellenic also declined to comment.

“It is all very complicated with Greece. Every deal is separate from the other, for every cargo you have different terms,” a trader at one of the two trading houses said.

Deep pockets and willingness to take risk have enabled Vitol and Glencore to keep copious oil flowing to Greece.

“If I had to deliver to Greece now, I would be feeling very uncomfortable,” said a dealer at a Russian trading house that does not supply Greece.

Referring to the risk that the two firms are taking, he added: “An operational hole of $100m (R840m) would have killed me. But I guess Glencore or Vitol can afford it. After all, the Greeks will manage to repay somehow in the future.”

State oil groups in Iraq and Saudi Arabia still supply a bit of crude and some firms, including Shell, ship sporadically. Last year Greece turned to Iran as its main supplier despite pressure from Washington and Brussels for a boycott in a campaign against Tehran’s nuclear plans.

Iran offered generous credit terms to sell its oil amid tightening sanctions.

Other EU countries, including Spain and Italy, are phasing out Iranian imports because of sanctions, but none became as reliant on Iran as Greece.

Vitol and Glencore declined to say whether they would continue supplies if Greece defaulted and left the euro zone.

“Highly indebted deficit nations in the euro zone are burning oil… they cannot afford,” Merrill Lynch said last week.

If Greece exited the euro, oil would become unaffordable in a new currency, it said. – Reuters

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