US Sanctions strand Iran ships ferrying corn from Brazil

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Published: July 21, 2019 10:12:56 AM

In a statement sent to the Supreme Court on Friday night, the attorney general’s office said Petrobras is not obligated to fuel the ships as the company responsible for them is able to buy fuel from others suppliers.

US Sanctions iran ships, Brazil, Brazilian corn, Latin American nation, Trump administration, US trade war, US china trade warIran was the main destination of the country’s corn in the past year, with imports totaling 6 million metric tons, according to government data. (Reuters)

U.S. sanctions on Iran are not only reverberating through the oil world, but also the agricultural market in Latin America. At least two Iranian vessels set to carry Brazilian corn are stranded off the Latin American nation’s coast because they can’t get fuel, according to the port authority at Paranagua, about 450 kilometers (280 miles) south of Sao Paulo. State-controlled oil company Petroleo Brasileiro SA said it won’t supply the ships — — which have been floating for over a month — due to the risk of U.S. sanctions.

Brazil’s Supreme Court may decide if the ships can be fueled. In a statement sent to the Supreme Court on Friday night, the attorney general’s office said Petrobras is not obligated to fuel the ships as the company responsible for them is able to buy fuel from others suppliers. In addition, the attorney generalsaid the diplomatic issue involving the matter should prevail over private interests.

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Iran was the main destination of the country’s corn in the past year, with imports totaling 6 million metric tons, according to government data.

The uncertainty surrounding the fate of the vessels is the latest evidence of how the Trump administration’s policies are rattling commodities markets across the globe. The U.S. trade war with China has already led to a shift in trade flows of everything from soybeans to sorghum. Meanwhile, American sanctions aimed at squeezing Iran’s revenue have left some of the biggest oil buyers searching for supplies from elsewhere.

MV Bavand, carrying 48,000 metric tons of corn, should have set off from Paranagua to Iran on June 8, the port authority said in an email. The ship had left Imbituba port, in Brazil’s Santa Catarina state, on May 15 after loading, according to vessel data compiled by Bloomberg.

MV Termeh has been waiting for fuel supply since June 9 to head to Imbituba Port, where it will be loaded with corn and then head to Iran, according to the port authority. It unloaded a cargo in Sao Francisco do Sul Port in Santa Catarina on June 1, data compiled by Bloomberg show.

“If Petrobras loads these ships, it would be subject to the risk of being included” in the U.S. sanctions list, which could result in significant losses for the company, the Brazilian state company said in a statement. “In addition, there’s information that these ships came from Iran loaded with urea, which is subject to U.S. sanctions.”

Iran and the U.S. have been at loggerheads since last year, when Donald Trump withdrew the U.S. from a 2015 nuclear agreement with the Islamic Republic he called the “worst deal ever.” In May, the administration refused to extend waivers to eight governments for Iranian oil purchases, ratcheting up the pressure on the country’s already battered economy.

Iran’s willing to meet with U.S. senators to discuss possible ways out of the dispute, the New York Times reported on Thursday. But also said the nation’s escalation of its nuclear enrichment program could be reversed if the U.S. drops sanctions that Trump imposed after withdrawing from the nuclear agreement.

“This is an isolated episode that won’t impact the rest of Brazil exports to Iran,” Jose Augusto de Castro, president of Brazilian Foreign Trade Association said in a phone interview.

Brazil’s exports to Iran total about $2 billion a year, with shipments mostly comprised of commodities like corn, meat and sugar, according to the association known as AEB. The Latin American country frequently receives ships from Iran, and Petrobras provides fuel for the vessels on a regular basis, Castro said.

The restriction only applies to these specific ships hired by a Santa Catarina-based trader as the Iranian company responsible for the vessels is named in the U.S. sanctions list, he said.

“Brazil has no interest in restricting exports to Iran, which has a strong import potential,” Castro said.

The risk involved in hiring sanctioned ships is solely for the Brazilian exporter company, Petrobras said by email.

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