Oil major LUKoil will cease supplying gasoline to Iran, industry sources said Wednesday, the latest addition to a list of companies that have halted shipments ahead of any possible international sanctions.
LUKoil, Russia's No. 2 oil company, has been supplying gasoline to Tehran intermittently, moving about 250,000 barrels to 500,000 barrels of gasoline every other month, traders said.
"They are not one of the major players in supplying gasoline to Iran, they do it on occasion," a trader said.
"But now they will stop because of pressure coming from their head office in Moscow."
LUKoil moved a 250,000-barrel shipment of gasoline to Iran's Bandar Abbas port on March 10 to 12, shipbrokers said.
LUKoil declined comment.
Sources familiar with the company said the Russian energy giant had received verbal directions from senior management instructing traders involved in gasoline sales to Iran to cease business activity.
LUKoil has significant exposure in the United States with about 2,000 retail gasoline stations, the largest U.S. presence among Russian oil firms. ConocoPhillips is a major shareholder in the company.
In March, Anglo-Dutch oil firm Royal Dutch Shell announced that it had stopped gasoline supplies to the Islamic republic, joining two of the world's largest independent trading companies, Glencore and Vitol, which had made similar decisions.
U.S. politicians are working on legislation to penalize fuel suppliers to Iran in an effort to pressure Tehran to stop uranium enrichment.
The West says the world's fifth-largest oil exporter is using its atomic program to develop a nuclear bomb, while Iran insists that it is for electricity.
Despite the sanctions, Iran has maintained a robust import program of gasoline from the international market, buying from Malaysia's state oil firm Petronas, Kuwait's Independent Petroleum Group and France's Total.
In March, Iran purchased about 128,000 barrels per day of gasoline, similar to imports made the previous month, traders said.
Although Iran has been having no problems sourcing gasoline supply, it has had to pay higher premiums for its purchases this month, traders said.
Iran has bought gasoline from the international spot market for April at Middle East naphtha quotes plus $90 to $100 a barrel.
The premiums were about 10 percent to 15 percent higher than purchases seen in January and February, traders said.
"They are not having problems for the moment buying gasoline from the international market. The import figures shows no signs of slowing down," a trader said.
"What could be an issue is if they have to start paying more, because that is a budget issue … and with Iran struggling to sell its crude, its pockets must be feeling a little more empty now," the trader said.
Energy-hungry Asian countries are the main buyers of Iranian oil, but recent months have seen a drift in Asia away from crude sourced from the Islamic Republic.
India's largest private refiner, Reliance Industries, will not renew a contract to import crude oil from Iran for financial year 2010, two sources familiar with the supply deal said April 1. Japan's Iranian crude imports are also seen declining this year, while China, the world's second largest consumer of oil, cut its crude imports from Iran by nearly 40 percent in the first two months of the year.
Senior Iranian officials have dismissed the effectiveness of sanctions on Tehran, and on Tuesday a foreign ministry spokesman described the threat of sanctions as a "joke."
Iran is the world's fifth-largest oil exporter but lacks adequate refining capacity to meet domestic demand for motor fuel, forcing it to import up to 40 percent of requirements.
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