MADRID: The governments of Iran and Spain are discussing the possible construction of an Iranian-owned refinery at the Gibraltar strait, a sign that the end of sanctions against the Islamic Republic may lead to a flurry of deals with European Union countries.
Speaking Monday in Brussels, ahead of a meeting of EU foreign affairs ministers, Spain’s José Manuel García-Margallo said the planned refinery would be built in the Spanish port city of Algeciras, on a site previously reserved for Russia’s Rosneft—a deal that had to be canceled after the EU imposed sanctions on Moscow following itse 2014 takeover of Crimea from Ukraine.
Mr. García-Margallo, Spain’s foreign minister and an outspoken promoter of closer dialogue with Tehran in recent years, said the Iranian deal would be the first among many between the countries. Spain was a major buyer of Iranian oil before sanctions were tightened in 2012.
“The entire Iranian energy industry needs to be rebuilt,” he told reporters. “Our political relationship with Iran is very good because we moved faster than other countries and are now very well placed for future business.”
U.S. Secretary of State John Kerry on Saturday announced that nuclear-related sanctions imposed on Iran were being lifted. Photo: AP
A nuclear deal between Iran and six world powers came into effect Saturday evening, triggering an end to years of sweeping economic and financial sanctions on Tehran over its nuclear work.
Under the U.S.-led agreement, most nuclear-related sanctions will be removed, reopening international markets to hundreds of thousands of barrels of Iranian oil and returning billions of dollars in frozen oil money to Iran.
The EU is dropping its energy embargo on Iran, and international banks will be able to re-establish ties with the Iranian central bank and other firms.
Restrictions on Iranian shipping, transport and other business will end, although U.S. terrorist and human-rights sanctions on Iran will stay in effect, meaning U.S. firms and Americans will face significant restrictions on how they conduct business with Iran. Companies from Spain and other EU countries are expected to face fewer restrictions.
Mr. García-Margallo said Monday that he visited Iran in 2014 to explore possible business deals after the end of sanctions, and contacts with Iran had continued since.
‘What we see here is a new chance for the region to stabilize and for our companies to secure good business opportunities’
“What we see here is a new chance for the region to stabilize and for our companies to secure good business opportunities,” he said.
Mr. García-Margallo added that an Iranian refinery in Algeciras would create much-needed jobs in a region that has the highest unemployment rate in Spain. Algeciras, a city of more than 100,000 people sits less than 20 miles from the Northern African coast across the Gibraltar strait, close to the smaller British enclave of Gibraltar.
The European Commission has been eyeing natural-gas imports from Iran as it works to reduce its dependency on Russian energy. Commission officials say that the EU could import between 25 and 35 billion cubic meters of Iranian gas a year by 2030. Because pipeline capacities from Iran to Europe are limited, most of that would likely come in the form of liquefied natural gas, or LNG, and could reach the EU via currently underused LNG ports in Spain.
However, some Iranian officials have played down their country’s interest in and capacity for large-scale exports to the EU in recent days, pointing to remaining limits on international financing for Iranian companies and low energy prices in the 28-country bloc.
The commission plans to send a first assessment mission to Iran in February, before launching a high-level dialogue on energy in the coming months.
The construction of a new refinery would run counter to trends in Europe, where oil companies have been looking for ways to reduce their refining capacity in the face of low margins. The refinery business has picked up over the past 18 months as oil prices sink to the lowest levels in 11 years, but the long-term outlook for the industry isn’t good because there is simply too much refining capacity, industry analysts have said.