LONDON (Reuters) - Syria is seeking to side-step sanctions that are hampering business with foreign firms by bartering crude oil in return for the fuel it desperately needs to keep the country on its feet, traders said on Friday.
Although the EU has stopped short of banning the sale of fuel to Syria for humanitarian reasons, companies are refusing to participate in tenders because it has become near-impossible to deliver and receive payment for fuel through international banks.
Both Syrian light and heavier Souedie crude are on offer in exchange for the oil products required to run its oil-fired power plants, keep its economy afloat and prevent widespread disruption to civilian life.
One crude oil trader said he refused to negotiate, adding that “nobody is going to lift crude.”
Syria needs to import gasoline, gasoil and diesel because the combined 240,000 barrel per day combined capacity of its two state-run refineries is unable to meet demand.
A tender has been issued for two cargoes of gasoil for delivery next month, but traders say they are unlikely to find a seller willing to undertake the risk. Gasoline suppliers have walked away as well.
“We are no longer supplying, it is very difficult. They definitely want to buy, if they can find anyone to sell,” said a products trader.
“I don’t think there are any buyers, ship owners mostly can’t touch it,” said another products trader.
One stream of supply has yet to be cut off, and that is LPG (liquified petroleum gas) - an oil product widely used in cooking and heating.
The main supplier of LPG to Syria, trading house Naftomar established in Beirut and later transferred to Greece, was unavailable to comment on how it was able to overcome the logistical hurdles that have put other companies off.
“You need an non-European bank to handle the Letter of Credit and final payment. Transaction costs will rise everywhere but that will not stop Syria from doing business,” said Eurasia Group analyst Ayham Kamel.
“A foreign institution will likely introduce some additional costs on dealing with the costs of Syria risks,” he continued.
In an internal memorandum from an oil company seen by Reuters, restrictions imposed on banks are predicted to bring imports to a standstill.
“As Syria uses the euro rather than US dollars in payments, it could not have access to credit facility, accredit, risk management operations will face serious problems... product sales to Syria will be very badly affected,” concludes the report.
As far as LPG deliveries are concerned, an industry source said that as long as financial transactions were viable and on the condition that tougher sanctions were not introduced, Syrians could at least count on fuel for heating and cooking.
“There are no problems getting letters of credit and there is the money, but of course, the risk is always present the situation may change,” the source said.
Reporting by Jessica Donati and Ikuko Kurahone; Editing by Anthony Barker