Greece has been making the world headlines for quite some time now – and for all the wrong reasons. After years of excessive borrowing, its economy eventually went down and the country’s government was forced to turn to the European Union and the International Monetary Fund for help.
Help was indeed provided, but at a price: severe cuts were required and the Greek government, despite initial promises, stalled for a long period.
This caused fears of a Greek default that could spread to other European countries with vulnerable economies such as Italy and Spain, threatening the euro and even the stability of the European Union itself.
Consequently, many suppliers have practically stopped dealing with Greece. “Companies like us cannot deal with them. There is too much risk. Maybe independent traders are more geared up for that”, an unnamed trader with a major international oil company told Reuters.
Since Greece does not produce oil (or at least not any significant quantities from its Thassos reserves), it has to import it. However, most companies cannot continue supplying the country: “We couldn’t find any bank willing to finance us. No bank wants to finance a deal for them”, said another trader who also acknowledged, “we missed some good opportunities there.”
EU data shows that last year, Greece imported 46% of its crude oil from Russia and 16% from Iran, with Saudi Arabia and Kazakhstan providing 10% each, Libya 9% and Iraq 7%.
In 2011, with banks and suppliers not providing any credit, Greece has effectively stopped buying oil from other countries and has turned to Iran for its crude oil needs.
The two companies that own Greece’s four refineries, Hellenic Petroleum and Motor Oil Hellas, declined to comment on the issue. One trader in the Mediterranean commented: “They are really making no secret when you speak to them and say they are surviving on Iranian stuff because others will simply not sell to them in the current environment.”
Iran, which is facing sanctions from the U.S. over its nuclear program, has no problem trading on an “open credit” basis with Greece.
The problem is than the European Union announced this week that it is also considering oil sanctions against Iran after U.N. reports that it is developing atomic bombs.
With Greece being a member of both the EU and NATO, pressures from its Western allies are mounting on the issue of dealing with Iran.
The newly appointed Greek government, led by former European Central Bank Vice-President Lucas Papademos, has the support of the country’s two major parties, center-left PASOK and right-wing New Democracy, and is determined to put the Greek economy back on track.
Perhaps this will appease both to Washington and Brussels as well as to international bankers, allowing Greece to be a credible client again and repair its severed ties with their former trade partners.
Story References: Reuters
