July 16, 2015 / 1:00 PM / 2 years ago

Exclusive: Russia plans fuel shipments to Syria from Crimea

People take part in celebrations for the first anniversary of the Crimean treaty signing in Sevastopol, March 18, 2015.Maxim Shemetov

MOSCOW (Reuters) - Russia plans to supply Syria with 200,000 tonnes of liquefied petroleum gas (LPG) per year via the Crimean port of Kerch, two trading sources told Reuters.

The plans are a further sign of cooperation between the two countries despite hopes in the West that Russia might stop shielding President Bashar al-Assad from pressure to step aside.

Moscow had been shipping significantly lower volumes of LPG to Syria via Kerch before Russia annexed the Crimea peninsula from Ukraine in March 2014.

The United States and the European Union, which say the seizure of Crimea violates international law, have imposed sanctions on individuals and business in Crimea, which include restrictions on use of the Kerch port.

Russia is a staunch ally of Syria and an exporter of arms to Damascus. President Vladimir Putin reaffirmed support for Assad last month, saying Moscow opposed any use of external force to try to end four-and-a-half years of conflict.

"There are talks about LPG to first be shipped to Kerch and then to Syria, about 200,000 tonnes per year," one trader said.

A second trader confirmed this separately, adding: "Syria needs the Russian fuel badly."

SANCTIONS

It was not immediately clear when supplies of the fuel, which can be used in cars, household utilities or to produce electric power, would start.

Sources said the LPG would initially be bought from Russia's top petrochemical firm Sibur by state-connected traders, who would then ship it to Syria themselves.

A spokesman for Sibur said the company had not and would not supply LPG to Syria and that it had not been in talks about LPG shipments to the country.

Traders familiar with the plans said cargoes would first be sent to Kerch from Russia and then on to Syria. The scheme, they said, was aimed at concealing the supplier's identity due to the possibility of sanctions from the West.

Supplies of cargoes to Crimea from Russia via the Kerch Strait are constrained by a lack of infrastructure and the sanctions. Moscow is considering building a bridge from Russia to Crimea through the strait.

"It would be logical for those countries who do not care about international sanctions to work via Kerch," a trading source said.

Only two of the four terminals in Kerch are now working and then only intermittently, because the business has been dampened by the sanctions.

A trader said Syria used to announce tenders for LPG purchases worth between 10,000 tonnes and 20,000 tonnes a month. LPG, or propane and butane, is cheaper than many other kinds of fuels, such as gasoline.

Russia's top LPG consumer is Turkey, which buys about 1.1 million tonnes of the fuel per year from Russia. Turkey has in the past resold LPG to Syria but the trader said those sales had been halted in December.

Additional reporting by Alexander Ershov and Damir Khalmetov editing by Timothy Heritage and David Clarke

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