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Malaysian exporters halt palm oil supply to Iran
The halt in Malaysia's palm oil exports to Iran, which the traders said started late last year, is the latest sign that sanctions aimed at persuading Tehran to abandon a suspected nuclear weapons programme have started to bite.
The sanctions, spearheaded by the United States and European Union, have made it difficult for Iranian palm oil buyers to use letters of credit and make payments via middlemen in the United Arab Emirates (UAE) to Malaysian exporters.
Malaysia is the world No.2 producer of palm oil, used to make products from bio-diesel to cooking oil. It is a key supplier of Iran's palm oil, along with Indonesia, the world's top producer. "Most of the companies selling palm oil to Iran have stopped since the end of last year," one trader with direct knowledge of the deals told Reuters on Wednesday.
"Payments are not coming through and no palm oil shipper wants to risk sending the cargoes to Iran with such a tense political situation," added the trader, who declined to be identified due to the sensitivity of the issue. Malaysia's Commodities Ministry and the Malaysian Palm Oil Council (MPOC) -- the country's key marketing agency for the tropical oil -- were not immediately available for comment.
The United States slapped fresh sanctions on Tehran from the start of this year, targeting financial institutions that deal with the central bank, hoping to stem Iran's oil revenues. U.S. President Barack Obama tightened sanctions on Iran another notch this month, again targeting its central bank and giving U.S. banks new powers to freeze assets linked to Tehran. The European Union has agreed to ban Iranian oil imports, a measure expected to take full effect within six months.
Iran, with a population of 74 million people, is finding it difficult to repatriate the hard currency from crude oil exports -- the major earner of the foreign currency it needs to pay for shipments of food and other imports. Iranian buyers defaulted on payments for about 200,000 tonnes of rice from their top supplier India, exporters and rice millers told Reuters on Tuesday. Ukrainian and European traders said they were no longer booking Ukraine grain shipments to Iran because of the payment difficulties.
Before the export halt, Malaysian palm oil firms would either sell directly to Iran or ship via Dubai, where edible oil would be stored in warehouses and repackaged before heading to the Bandar Abbas port. About 90 percent of the UAE's imports of palm oil are marked for re-export, with Iran as a key destination, traders said. In 2011, the UAE imported about 400,000 tonnes of palm oil products, according to MPOB data.
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