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SPECIAL REPORT

Syria back on oil trading map as deliveries boom

London, March 12, 2013

Syria is back on the oil trading map this year with more than a dozen shipments of gasoil reaching a government-controlled port in February, ending months of isolation as foreign sellers and officials say it is not their job to monitor private deals.

The sales are worth over $100 million at current prices and are the clearest sign yet that oil dealers' reluctance to supply the war-ravaged country is waning.

While it is legal to supply Syria with refined products such as gasoil, which can be used to run vehicles and heavy machinery, selling the fuel to the state's oil trading and distribution firms is prohibited by sanctions.

This is because the fuel, while it could be for peaceful purposes such as farming vehicles, can also be used by the army.

As a result, sanctions cut off the Syrian government from its usual suppliers in early 2012 and for much of the year, Syria's only supplier of gasoil by sea was its main political ally, Iran.

That said, foreign firms are free to sell to non-state dealers, and in January senior Syrian officials said Syria had started to allow private firms to import fuel.

But even before this announcement was made, late last year the first vessels had already started to arrive from Georgia on the Black Sea and Lebanon in the Mediterranean.

Firms that deliver to Syria say the buyers are not on the sanctions list, but won't say who in Syria is buying their fuel.

As the war has raged on, costing more than 70,000 lives, imports have risen sharply, and Syria received at least 17 shipments of gasoil and heating fuel (LPG) last month.

The pace of imports appears set to continue, with eight vessels already docking at Syrian terminal Banias in March.

The deliveries are now roughly split between Turkey and Lebanon, with only one appearing to arrive last month from Kulevi in Georgia, which had exported several cargoes to Syria in January.

The firms transporting the fuel to Syria from its neighbours say deliveries are legal and see no problem with it.

"Our lawyers have conducted a careful due diligence that has confirmed the legitimacy of the transport service and neither cargoes nor entities are under U.S., UK or EU sanctions," said Paolo Cagnoni, who heads Mediterranea di Navigazione S.p.A., a family-run Italian tanker firm that delivers to Syria.

An EU spokesman said enforcing sanctions was the responsibility of member states and risks of circumvention were regularly assessed.

"The EU is vigilant on effective implementation of measures," said Michael Mann, a spokesman for the EU foreign policy chief.

Concern that shipments may be used to fuel military vehicles engaged against the Syrian rebels is dismissed by agents because they say their cargoes' final use is unknown and in any case not the responsibility of intermediaries.

"Who told you the gasoil goes to one side of the war or another, and not a school for heating for example?" said an employee of Evalend Shipping, a Greek firm, who did not give his name.

"Do you think shipping companies that transport cargoes all over the world know what the ultimate use is?" he said, adding that a lot of assumptions would have to be made before the deliveries could be linked to the Syrian military.

He said the firm was only acting as an agent and following the instructions of the vessel owners.

Reuters could not find contact details for the owners of the vessels in question, which appeared to be entities registered in the Marshall Islands, according to shiptracking information.

BLIND EYE

At a national level, governments that either support the rebels or have opted to maintain a neutral position say policing private firms is not their responsibility.

Lebanon, for instance, is staying out of the war but will not interfere with the actions of private firms that may be providing support to Syrian President Bashar al-Assad.

The director general of Lebanese oil installations, Sarkis Halis, told Reuters: "We as a state do not send fuel oil to Syria. There are companies from the private sector who send diesel oil to Syria."

Turkey openly supports the rebels, but also says it is not responsible for the actions of private firms in Turkey, adding that volumes delivered were small and used to relieve human suffering.

"Turkey is sending fuel oil to Syria in small amounts as humanitarian aid. Fuel oil has been sent not by the government but by the private sector," a Turkish energy official told Reuters.

The official added that some volumes arranged from abroad had been shipped from the port of Mersin in Turkey - again, not the state's responsibility.

"Some of the aid coming from overseas has also been sent from Mersin port. However, these are also very small amounts and in line with humanitarian aid," the official continued.

Similarly, oil firms that sell gasoil from various ports, such as Kulevi in Georgia, which is owned by Azeri state energy firm Socar, say the final destination of the cargoes is not their responsibility.

"Since title to oil products is passing from us to the buyer in Baku ... we are not responsible for final destination," said Magsud Mahmudov, a Deputy Manager at Socar's Export Department.

That said, some companies remain concerned their shipments might be going to Syria.

After two tankers loaded with Russian diesel sailed to Syria in December after being sold by oil trading firm Gunvor, the company tightened contract terms to prevent any recurrence.

"Gunvor's counterparty reviewed the claim (that Russian diesel sold by Gunvor had ended up in Syria) and assured Gunvor in writing that the cargoes, which were sold FOB by our counterparty to another counterparty, had the destination of Turkey being sold to a European entity," said Seth Thomas Pietras, a spokesman for Gunvor.

"Gunvor subsequently decided to strengthen its contract language with counterparties to enhance its existing contractual prohibitions against trading with countries and entities under economic sanctions.” – Reuters




Tags: Oil | Syria | gas | war | assad |

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