April 19, 2013 / 1:36 PM / 6 years ago

New private firms restore Syrian fuel imports despite EU ban

* Flows rise after private firms allowed to import fuel

* EU states either unaware or unable to monitor deals

* Lifting sanctions may be politically difficult

By Jessica Donati

LONDON, April 19 (Reuters) - Syria has resumed vital fuel imports in the teeth of EU sanctions against sales to its state sector simply by letting new private firms do the buying, traders and shippers said.

The trade is being handled largely by Italian and Greek shipping firms and officials of these countries’ governments say they are not monitoring it closely, if at all.

Since Syria granted private firms the rights in January, fuel imports rose from a near standstill to as many as 20 shipments in March.

For much of the previous year, Syria’s imports of fuels such as diesel had been limited to sporadic shipments from allies in Iran and Venezuela, rather than its usual regional suppliers.

This was because tighter European Union sanctions, introduced in early 2012, blacklisted state firms including distributor Mahrukat as part of the bloc’s response to President Bashar Al-Assad’s crackdown on mass unrest.

Although Syria produces some crude and oil products it lacks crucial fuels including diesel for heating and vehicles.

Fuel traders and shippers say the role of the new private importers obscures the ultimate recipients, and the opaque business is making large sums for the suppliers involved.

A major shipper with long-standing business ties to Syria said Mahrukat was still the receiver at the state-controlled port, Banias, and the same port employee continued to send him reports on Mahrukat’s activities there.

He said it was possible private firms were being used as intermediaries to avoid naming blacklisted Mahrukat on paper.

When contacted by Reuters in March, Mahrukat said it had not bought any refined oil from abroad.

“These (state) companies have probably established contracts with Syrian traders who are now allowed to import energy products,” said Ayham Kamel, a Middle East analyst at the consultancy Eurasia Group.

“At some stage beyond delivery at a Syrian port, the government could get involved.”

Syria previously bought fuel via competitive tenders and former partners say it is now forced to pay high asking prices.

“We conclude it is off-limits for a first class company like ourselves,” one trader said. “We are of course not very happy seeing these (firms)... enjoying what is probably a bonanza for them.”

A source at a brokerage who believes new private firms are directly linked to Assad said: “The premia involved are very high and only such importers can afford to pay these sums.”

“It will be difficult to prove it when transactions are being made in cash,” the brokerage source added.

Volumes for February indicate that at current market prices the oil product market to Syria is worth $100 million, but the real figure is likely to be far higher - the risk premium for shipping alone is far above standard rates.

The use of private firms to import oil is more successful than Syria’s earlier attempt to create a new central body that was not blacklisted. The EU said at the time any dealings with new entities “could be considered as a circumvention”.

Italian and Greek shipping companies have now been tempted back into the market, arguing their vessels are delivering to private buyers.

Private company or not, the bloc’s stance is that even if an entity is not listed, it would be covered by the ban if it indirectly made funds and economic resources available to blacklisted entities.

An EU spokesman, Michael Mann, said it was up to national governments, in the first instance, to police the sales.

“Countries agree these measures unanimously and have an interest in policing them and the legal responsibility to do so,” Mann said in an emailed statement. “If they are not implemented properly, we can of course take measures.”

UNAWARE OR UNABLE

At a national level, officials in Greece and Italy have told Reuters they are either unaware of the deliveries or unable to monitor the deals and who the ultimate recipients of fuel are.

The Greek government declined official comment.

Asked to comment on one trader, an Italian Foreign Ministry spokesman said: “The loads transported...and destined for Syrian companies that are not listed (on the EU’s sanctions list) are legitimate and there is no legal basis to block them.”

Greek and Italian firms that have provided vessels for the deliveries deny dealing directly with companies on EU or US blacklists but they declined to say who is receiving the fuel.

One of the traders supplying Syria, Pangates International Corp. Ltd in the United Arab Emirates, acknowledged that it was delivering oil to the country but said it did not know who was the final recipient of the fuel.

“We are selling to non-Syrian firms who are not on the EU and US sanctions list,” the company said in an email, adding it could not comment further because the situation was complicated.

“We do not know exactly who is finally using the fuel but according to our information the product is used for civil humanitarian purposes.”

The EU is divided over how to approach the Syrian conflict with has dragged on for two years claiming the lives of 70,000 people. Some favour exempting the rebels against Assad from the embargo on arms and oil trading.

EU governments are expected to ease a Syrian oil embargo next week to allow purchases of crude from the opposition. Backers say this could boost the Syrian National Coalition’s credibility as an alternative to Assad’s government.

Eurasia Group analyst Kamel said EU politicians may be content to leave in place fuel sanctions that do not fully work.

“Politically, it would be very difficult for EU member states to lift energy sanctions, even if they are ineffective,” Kamel said. “From an ethical point of view, I don’t believe that EU politicians are interested in a total ban that punishes innocent civilians.” (Additional reporting by Catherine Hornby in Rome, Renee Maltezou in Athens and Shadia Nasralla and Julia Payne in London; Editing by Anthony Barker)

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