Claiming that previous oil swapping agreements were treacherous, the Iranian oil minister has banned oil swapping with countries bordering the Caspian Sea. Iran used to swap between 80 to 150 thousand gallons of oil per day through with countries bordering the Caspian.  The minister’s statement refers to previous international oil administrators who allegedly included such oil swap figures in Iran’s export balance sheet as exports.

The Ahmadinejad administration is halting oil swapping even though its supporters and advisors have a long history of swapping oil and petroleum products in Iran’s Ardebil province.

Oil swapping is a trade mechanism in oil and gas industries. A country or company delivers oil or oil products to another in return for an equivalent amount of oil or some petroleum product at a port or another city. This simple transaction, which is an ordinary occurrence in the oil and gas industry, is entangled with the highest level of economic corruption in Iran. Located in the north of Iran, the Caspian Sea contains vast amounts of oil and gas, which must be transported by pipeline to ports that have access to open waters. Because of its special location bordering the Persian Gulf in the south, Iran can play a determinant role in this economic exchange. For the past 13 years, Iran has participating in oil swapping practices by helping the Caspian Sea countries transfer their oil and gas to the Persian Gulf. In essence, oil swapping is an exchange agreement according to which Iran receives crude oil at the Caspian Sea and, after receiving some compensation, delivers the same amount of crude oil in its southern ports to the country under the agreement.

Energy experts recognize five oil swapping paths related to the Caspian Sea. According to the Shana report, the northern route, which transfers Kazakhstan and Azerbaijan’s oil through the Black Sea, is supported by Russia. The report continues, “The southern route, which transfers the three countries’ energy resources to the Persian Gulf for delivery on oil tankers, is supported by Iran. The western route, which transfers the three Caspian Sea countries’ oil and gas resources through Turkey and Georgia (Black Sea) to Europe, is supported by the United States, Turkey, Azerbaijan and Georgia. Also the southeastern route, which transfers Iran’s oil and gas resources to ports in Pakistan, India and the Gulf of Oman, is supported by Pakistan and Afghanistan. The eastern route transfers oil and gas from Kazakhstan and Turkmenistan to eastern China and is supported by China.”

A while ago, Eco News reported, “The oil ministry did not renew its oil swapping contract with the four international giants, Select Energy Trading, Dragon Oil Emirates, Switzerland’s Vitol and Ireland’s Caspian Oil Development in the new year. These companies have begun discussing their oil activities in the Caspian Sea with Russia and the Azerbaijan Republic.”

According to the report, the main reason for the non-renewal of contracts were mainly due to Iran’s decision to raise oil swapping prices. Unofficial sources have reported that Iran intends to increase the oil swapping price from 1.1 to 5.5 dollars per barrel.