Iranian Agreement May Result Higher Oil Imports for Turkey, Energy Minister Says

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Researched by Industrial Info Resources (Sugar Land, Texas)--Turkey could increase its oil imports from neighbouring Iran once sanctions are lifted as part of the recent nuclear agreement between Iran and six world powers. "We may increase the amount of crude oil from 105,000 barrels per day to 140,000 barrels per day," said Turkey's Energy Minister Taner Yildiz in an interview in CNBC-e television. Natural gas and crude oil are Turkey's main imports from Iran.

"Before the sanctions, half of our oil imports came from Iran," Yildiz said. "Different things can happen in different countries. Our priority is to meet the needs of Turkey, to secure energy sources. Every $10 increase in crude oil prices raises Turkey's annual oil payments by $4 billion."

Iran agreed to curb its nuclear activities for six months in exchange for some sanctions relief worth about $7 billion. The International Energy Agency estimated in its latest report earlier in November that Iran's exports dropped to 715,000 barrels per day in October, from about 1.26 million the previous month.

If the accord holds, Turkey should benefit from improved trade relationship with Iran, particularly its crude oil purchases from Iran."If the sanctions are channelled into the right direction, it will benefit both the region and the world," Yildiz said.

According to Turkstat, Turkey's energy imports climbed 11% to $60.1 billion last year, more than double the 2009 bill. This year's nine-month import bill is $41.4 billion. Turkey earlier this month rejected making further reductions in its oil imports from Iran, which has been hit by U.N., EU and U.S. sanctions. It had been granted a six-month waiver on Iranian oil imports by the U.S., and Washington is expected to review an extension next month.

"We will lift the barrier put in front of us by sanctions," Economy Minister Zafer Caglayan said in a televised presser in Istanbul. "Turkey will be able to send export products, including gold and precious metals, to Iran again." Caglayan will be visiting Iran on January 15-16, he said.

According to Turkstat, Turkish exports to Iran slumped to $3.4 billion in the first nine months of this year, compared with $9.9 billion in the whole of 2012, as sanctions barred Tehran from accepting gold as payment for oil. Precious metals accounted for 66% of direct exports to Iran in 2012.

"The tone of the accord suggests a gradual removal of sanctions, with no particular timeline regarding if and how the waivers granted by the U.S. would be extended or ease further," said Kazým Andac, an analyst at Deutsche Bank in Istanbul. "We expect a slow, yet progressive pace of normalization in Turkey's trade relations with Iran, which should primarily benefit the Turkey's sole oil refiner Tupras (BIST:TUPRS) (Istanbul, Turkey)." Oil prices fell 2% Monday, as the nuclear deal was expected to soothe geopolitical tensions.

"We believe that the sharp drop in oil prices as a result of the Iran oil deal should provide some relief to the high-energy bill currencies, of which the Turkish lira is our favorite," said Benoit Anne, an emerging markets strategist at Societe Generale in London.

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