Exclusive: Samsung Total strikes Iran oil deal, lured by cheap fuel - sources

Fri Jan 25, 2013 8:15am EST
 
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By Florence Tan, Seng Li Peng and Meeyoung Cho

SINGAPORE/SEOUL (Reuters) - South Korea's Samsung Total Petrochemicals Co has revived a contract to buy Iranian oil after a year's hiatus, as thin margins in plastics make the cheap fuel from Iran hard to resist, people familiar with the deal said on Friday.

Stringent U.S. and European sanctions aimed at reducing Iran's oil income and forcing Tehran to curb its nuclear program have made shipping and paying for the oil hard, halving the Islamic Republic's crude exports.

The deal is a rare example of a buyer returning to the market for Iranian oil despite the obstacles arising from sanctions and efforts by Western powers to stem the flow.

After jarring interruptions in exports from Iran last year that included a halt in shipments to top consumers Japan and South Korea, importers have found ways to keep oil flowing without violating sanctions.

The allure of cheap oil and improved margins has made it worthwhile for the South Korean joint venture between two big international firms to find ways around difficulties.

The deal may save Samsung Total as much as $6.7 million in costs, according to Reuters calculations.

"The deal can be easily understood if you look at Samsung Total's financial situation," according to a government source in Seoul with direct knowledge of the matter.

The company is a joint venture between South Korea's Samsung Group and French energy giant Total.   Continued...