VINACHEM

Middle Eastern and Asian players are facing difficulties settling trades with their Iranian counterparts amid growing pressures to isolate Iran over its suspected pursuit of a nuclear weapons programme. UK and Canada have also announced plans to impose further sanctions on Iran.

The US named Iran as an area of "primary money laundering concern” this week, prompting financial institutions to take extra care in their dealings with the country.

South Korean banks, which used to act as a middle man for transactions involving the import and export of Iranian cargoes, are now being restricted from handling tri-party transactions, market sources said.

Settlements should now only be directly between South Korea and Iran, thereby firmly shutting the South Korea route in trading of polymer cargoes for northeast Asian and Middle Eastern players, trader said.

Some of these players have switched to selling through traders based in Dubai, UAE, but there are signs that this route, too, will close, they said.

“While we change our route of selling, we also reduce our sales volume to Iran,” a major northeast Asian PE producer said.

A number of Pakistani and Indian traders said they have avoided importing Iranian materials because of the payment issues through Dubai-based banks, which have been told not to handle Iranian trades.

“It is getting more and more difficult for us to open LCs (letter of credits) for Iranian imports, and the banks in Dubai are refusing it. So, we have started to look for new sources to avoid this,” a polymer trader based in Karachi said.

Volumes of Iranian HDPE film and low density PE (LDPE) film imports entering Pakistan and India will likely fall further, market sources said.

China, which is Iran’s biggest export market for polymers, has also been cutting volumes of imports from the country.

Iranian importers are also losing business opportunities as they have to import LDPE film, HDPE film and PP products, as large quantities of domestic LDPE and HDPE film are exported.

In terms of annual PE consumption, Iran is almost at par with Saudi Arabia – the biggest polymers market in the Middle East. The country consumed more than 1m tonnes of PE in its fiscal year ended 21 March 2011, while its annual PE exports are pegged at roughly the same volume.

Iran is a net exporter for LDPE film and HDPE film, and a net importer for HDPE pipe grade.

“Foreign currency is in high demand in Iran now, and Iranian suppliers here, will continue to export to receive foreign currency and earn extra bucks in the black market,” an Iranian trader said.

Highlighting how serious the sanctions have now become, vessels originating from and owned by Iran are also being banned from shipping cargoes to the rest f the world, industry players said.

A Dubai-based trader related that bank financing for PE imported from India was not processed simply because the cargoes were on board an Iranian vessel.

“The bank has terminated our LC (letters of credit), saying it [the transaction] is forbidden. The impact from the US sanctions is becoming more serious, not just we cannot sell or buy to or from Iran. We can’t even use an Iranian vessel,” he said.

Cash payment is out of the question, according to Iranian importers, since transactions must be settled in US dollars, the availability of which is scarce and can only be obtained at a high price in the black market.

But Iran’s National Petrochemical Company (NPC) managing director Abdolhossein Bayat was quoted at news daily, Tehran Times, as saying that exports to Europe will continue despite the new sanctions imposed by the US.

Iran exports some $2bn (€1.48bn) worth of petrochemicals to Europe on an annual basis, the NPC official said.

($1 = €0.74)