August 14, 2017 #205
world
13
urkey Defiant as German Relations Slump to a Postwar Low
Turkmen origin crude oil discharged in Iran bypassing American sanctions On August 3rd vessel VF Tanker-20 under the Russian flag arrived to the Iranian Caspian port of Neka and discharged about 6’000 tonnes of Turkmen origin crude oil produced by the company “Dragon Oil”. The discharge of that cargo took place on 3-4 of August into the terminal, which is owned and and operated by NIOC (National Iranian Oil Company). This is the first time in a long time that “Dragon Oil”, 100% owned by the “Emirate National Oil Company (ENOC)”decided to deliver crude oil cargo to Iran independently, via its trading sister company “ENOC Singapore”. Till today, Dragon Oil sold all its crude oil export volumes on tenders on FOB Aladja, Turkmenistan basis. Due to the sanctions against Iran, export volumes were transported since 2011 solely towards Europe through territories of Azerbaijan (either via pipeline Baku-Tbilisi-Ceyhan or via railways Baku-Batumi) and Russia (via pipeline MakhachkalaNovorossiysk). The decision of Dragon Oil and ENOC to resume oil supplies to Iran caused surprise among market participants. Despite the fact, that some of the sanctions against Iran were lifted in 2016 after “Iranian Nuclear Deal” in November 2015, many restrictions are still in place to date. Most of the companies prefer to wait for detailed recommendations from the Office of Foreign Assets Control of the US Treasury (OFAC) before starting any business related to Iran. In this particular case, the decision of Dragon Oil to start deliveries of crude oil to Iran looks both hasty and risky: this oil producer performs all financial transactions in US dollars, works on a long-term basis with US contractors (for instance: the largest American oilfield service company “Schlumberger”) and has US citizens occupying top-management positions. It also looks surprising, that ENOC, the National oil company of the United Arab Emirates, is actively developing new business with Iran, bypassing US sanctions, despite the fact, that the UAE is the USA’s main ally in the region. It is not excluded that this delivery to Iran was not initially planned. Indeed, the vessel VF Tanker-20 arrived first in port of Baku, Azerbaijan and queued on roads from July 25th to August 1st. However, the vessel was rejected for discharge due to the not documented (possibly smuggled) cargo aboard the ship being found. Thereafter, ENOC redirected the tanker to the Iranian port of Neka, where it is possible to discharge cargo without actual presentation of documents for the goods. By now, the market participants are waiting for further developments of the situation: was this oil shipment a random cargo discharged in Neka because of documents issues, or is it a start of a planned program for the supply of Turkmen crude oil to Iran? Several signs speak in favour of the second scenario: ENOC is currently very active on the freight market and several ships belong to the Russian shipping company “VF Tanker” were redirected to the Caspian Sea towards the port of Aladja.
Turkey’s Foreign Minister Mevlut Cavusoglu said his country wouldn’t give in to threats, as relations with its NATO ally Germany slumped to their lowest since World War II. Cavusoglu was responding to an announcement by German Foreign Minister Sigmar Gabriel earlier Thursday of a “re-orientation” of German policy toward Turkey, in which he warned companies against doing business in the country and issued revised guidelines for travelers. “Germany knows very well that the Turkish people have never bent in the face of any threats or blackmail,” Cavusoglu said. “We will evaluate these threats made to us with the same state seriousness and we will of course respond.” The tit-for-tat escalation underscores what Turkey called a “serious crisis of confidence” with Germany that threatens to harm trading ties worth more than $36 billion last year. After months of discord over NATO troop visits, imprisoned journalists and Turkish
barbs peppered with Nazi references, tensions came to a head this week over the detention of a German human-rights activist. “This is the worst crisis between Turkey and Germany since World War II, when Turkey and Germany took their places on the opposite camps even though Turkey did not enter the war,” Huseyin Pazarci, a professor of international relations who lectures at Near East University in northern Cyprus, said by phone from Ankara. “Political and trade relations with Germany have been steadily improving since it began receiving Turkish workers in 1960s.” The rapidly escalating situation affects two NATO allies that are mutually dependent. Germany is Turkey’s largest trading partner, while ethnic Turks make up Germany’s largest minority. More than 6,800 German firms are currently operating in Turkey, according to the German-Turkish chamber of commerce.
ADB doubles loan amount for NorthSouth project
ENOC continues to supply crude oil to Iran despite sanctions Despite the sanctions, the companies Dragon Oil and ENOC shipped the next crude oil cargo to Iran. At the end of July, the same vessel VF Tanker-20, carried crude oil produced by Dragon Oil, arrived on roads of Baku port, Azerbaijan. However, after one week delay, caused by detection of some undeclared cargo on board, suddenly rushed to Iranian port of Neka and discharged crude oil to the terminal, operated by the National Iranian Oil Company (NIOC). On August 7th, VF Tanker-20 loaded a new cargo of crude oil in Aladja port, Turkmenistan, and moved towards direction of Baku, Azerbaijan. However, soon after exiting the territorial waters of Turkmenistan, the ship turned to the south and later arrived to Neka port in Iran. It would appear, that this maneuver is linked to the fact, that Dragon Oil and ENOC, most likely, didn’t obtain necessary permissions from Turkmenistan Government authorities (State Customs Services and others), allowing Turkmen crude oil supply to Iran, and, therefore, issued cargo and custom documents, showing port of discharge Baku, Azerbaijan for
further transit delivery to Europe. It is not excluded, that Dragon Oil will not be able to obtain such permission at all, due to the serious worsening of relations between Turkmenistan and Iran after a dispute over payment for Turkmen natural gas delivered to Iran and intention of Iranian side to sue Turkmenistan in international arbitration courts. Moreover, such movements of the ship may be explained, as the attempts of Dragon Oil and ENOC to hide the true destination of crude oil delivery – Iran, and, therefore, to avoid being included into the list of companies, violating US sanctions against Iran. We recall, that NIOC (National Iranian Oil Company), NICO (trading structure of NIOC) and their related entities in various countries are included in the US sanctions list. At the moment, Dragon Oil and ENOC are loading the third crude oil cargo aboard vessel VF Tanker-13 (belong to the same shipping company VF Tanker from Russia). Whether this vessel will go to Iran again, bypassing US sanctions and customs regulation of Turkmenistan, remains under question.
The Asian Development Bank (ADB) increased the loan amount [from $200 million to $400 million] for the International North-South Transportation Corridor (INSTC), as well as for the development of the railway sector of Azerbaijan. The Bank reported that in this regard, ADB has postponed the terms of consideration of the credit allocation. The bank planned to review the project on August 25, 2017, but now the date was postponed to September 22, 2017. Besides, the project fact gathering mission has been postponed from 1-11 August for 28 August-8 September 2017. The loan will be directed mainly to develop the Baku-Yalama railway line (the border with Russia) within the framework of the INSTC and support the expansion of the autonomy of the management of the Azerbaijan Railways CJSC, effective financial restructuring of the company’s obligations, expansion of financial and managerial control, efficiency and accountability in Azerbaijan Railways, as well as business development and corporate restructuring of the department. The North-South infrastructure reconstruction project involves rehabilitation of the 441-kilometer Baku-Yalama [double-track] section, development of a computerized cargo management system and provision of consulting services for the project. The International North–South Transport Corridor is a 7,200-km-long multi-mode network of ship, rail, and roadroute for moving freight between India, Russia, Iran, Europe and Central Asia.