European companies and trading houses are not rushing to buy Iranian oil because of legal uncertainties over the lifting of sanctions that are likely to take weeks to clarify.
A lack of dollar clearing, the absence of an established mechanism for non-dollar sales, insufficient clarity on ship insurance and the reluctance of banks to provide letters of credit to facilitate trade are all giving cause for caution.
Iran used to sell as much as 800,000 barrels per day (bpd) to European refiners in Italy, Spain and Greece before sanctions over its nuclear program were imposed. European markets have since then been inundated with extra oil from Saudi Arabia, Russia and Iraq.
Iran ordered a 500,000-bpd increase in oil output, of which 200,000 bpd will go to Europe, after the nuclear-related international sanctions were lifted on Saturday. But many European firms are wary of violating other sanctions that were imposed by the United States and have not been lifted.
Russian oil major Lukoil’s chief executive, Vagit Alekperov, said it was still not clear whether the company’s refineries in Italy or the Netherlands were free of legal risks to buy Iranian oil.