US Restrictions on Iran's Petrochemical Sector Another Political Ploy

EghtesadOnline: New restrictions that the Trump administration imposed on Iran's petrochemical sector last week is another “political tactic" and "a psychological war" and will not undermine production or exports.

News ID: ۷۴۷۵۳۴

12 June 2019

Behzad Mohammadi, head of the National Petrochemical Company, made the statement on Monday on the sidelines of a ceremony to sign a memorandum of understanding with the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) to develop 14 petrochemical plants in the Parsian Special Economic Energy Zone in  Hormozgan Province, NIPNA, the NPC's news portal reported.

"Completion of the first phase of the project will add 15 million tons of petrochemicals to NPC's exports," he said, noting that the plan will also increase domestic feedstock output.

Lack of feedstock is the petrochem sector’s Achilles' heel and last winter some petrochemical plants pulled down their shutters due to this problem, Financial Tribune quoted him as saying.

Referring to the US Treasury Department latest sanctions against NPC that would apply to the Persian Gulf Petrochemical Industries Company and 39 of its 60 subsidiaries and foreign sales agents, he said, "Sanctions are not something new. We have been dealing with challenges [like money transfer restrictions] since 2010 in some form or fashion. Nonetheless, we have not lost our share of the international market."

The company will stay the course and continue its declared policy to enhance production and exports, he added.

The official went on to say that olefin plants at Ilam Petrochemical Complex, the first phase of Bushehr Petrochemical Complex and Kaveh Methanol Company in Bushehr Province will lift annual petrochemical output to over 60 million tons by March 2020.

NPC's current annual output is in the region of 55 million tons.

Substantial Share

"NPC accounts for 10% of the methanol produced in the world," Mohammad Javad Badri, the managing director of Fanavaran Petrochemical Company off the Persian Gulf, told the Persian-language economic newspaper Donya-e-Eqtesad on Tuesday.

An estimated 80 million tons of methanol is annually produced in the world, of which Iran’s share is 8 million tons. There is high international demand for Iranian methanol and Iran exports this critical item to 30 nations in Asia, Europea and South America.

Badri said when methanol is shipped to India there are many buyers.

According to Abdolhossein Bayat, NPC's former boss, global demand for petrochemicals outweighs supply and this indicates “why the new sanctions are unlikely to harm NPC.

Differentiating between petrochemicals and crude oil, Bayat noted, "Countries like Saudi Arabia and the UAE may be able to produce more oil to fill the gap caused by a tightening of US sanctions on Iran’s oil exports. But they cannot do the same with petrochemicals."

Iran produces a large variety of petrochemicals (almost 350 types), most of which are marketed by private companies.

"There are several hundred customers worldwide for Iran’s products," Bayat said.

Moreover, a substantial amount of petrochemicals is  sold to domestic companies to be transformed into  higher value-added goods.

Donald Trump, America’s most controversial president in recent decades, in May 2018 withdrew from the international nuclear agreement Iran signed with six world powers, under which Tehran curbed its uranium enrichment program and won sanctions relief in return.

Later that year he imposed tough sanctions on Iran’s oil and banking sectors in what his team loves to call a policy of “maximum pressure” to force Tehran to agree to a new “comprehensive agreement” that would incorporate its missile program and regional policy. Senior officials in Tehran have officially said they are not interested in any new talks with the US and its present unstable and overtly leadership.