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The Greek flirtation with Iran

31 January 2016 / 16:01:24  GRReporter
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Prime Minister Alexis Tsipras will be accompanied by a high-level business delegation during his official visit to Iran in February. It will be another milestone in the efforts to strengthen the economic ties between the two countries after the first framework agreement was made between Hellenic Petroleum S.A. and the Iranian state oil company, ΝΙΟC. Greece has traditionally been Iran's ally in Europe, and the relationship was kept alive even during the embargo. After its lifting, Iran hopes to utilise this channel in its drive to penetrate the European market.

For Greece's emaciated economy, Iran's demand for infrastructure and commodities might offer a way out: Greek companies – from food and pharmaceutical producers to the construction sector and heavy industry – could do with getting an early foothold in the oil rich country. In previous contacts with the Greek side, the Iranians have given clear signals that they want Greece to be their ally and gateway to Europe. According to diplomatic sources, Iran has extended an invitation for investment in various areas, "from brooches to metals and energy."

Moreover, Iran has indicated it might ease Greek companies' way into its investment market if given the chance to obtain a share in Hellenic Petroleum. Iran's interest in the company was formalized by the deputy oil minister, Amir Hossein Zamaninia, right after his visit to Athens and the signing of an agreement between Hellenic Petroleum and ΝIOC. Zamaninia told the Iranian news agency that the private sector in his country is interested in investing in Hellenic Petroleum with the backing of the national oil ministry. The Iranians linked their proposal for a stake in the Greek company with handling its debt to NIOC. It goes back to 2011 and amounts to somewhere between €600 and €700 million. This scope is due to the amount of outstanding interest, which the Greek side has challenged with the argument that the garnishment of its money transfer by the international banking system back in 2011 is not its responsibility.

Another two important points of the contract have yet to be agreed. The first one is the term of the loans for the contracted deliveries of crude oil. Hellenic Petroleum wants it to be 60 days while the Iranians prefer 30 days. The second moot point is the letters of credit. The Iranian side has yet to decide whether it wants to accept letters of credit from Greek banks, and the issue has reportedly been transferred to Iran's Central Bank to investigate. These key issues will be further negotiated during Tsipras' visit to Iran. Once the agreement is done, the first deliveries of Iranian crude to Hellenic Petroleum refineries will start – after a hiatus since the embargo imposition back in 2012.

The agreement will secure the way of 4,000 barrels per day into Hellenic Petroleum's tanks, which corresponds to roughly 20% of its crude oil needs. Imports from Iran used to cover 30-32% of these needs before the embargo. The Greek debt is scheduled to be paid off within 4 years, with the first $100 million instalment being paid through sales of final petroleum products on the Iranian market.

Zamaninia's confirmation of Iran's interest in Hellenic Petroleum gives new dimensions to the scenarios, which were tossed about in November during the visit of Foreign Minister Nikos Kodzias in Tehran.

Both Hellenic Petroleum and the ministry of energy have confirmed Iran's intention to attract investments in its own refineries as they are in urgent need of modernization. The Greek government will deliberate on all aspects before heading towards official negotiations with Iran on the subject.

Anyhow, the final decision implies discussion on two levels. One is with the Latsis Group, the main shareholder in Hellenic Petroleum, and the other with Greece's partners from the US and the EU to assess the geopolitical implications of such a deal.


Tags: Iran embargo Hellenic Petroleum investments
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