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Switzerland - The world’s largest oil traders have quietly stopped supplying petrol to Iran in a sign that the threat of sanctions and Washington’s behind-the-scenes efforts are paying off.

However, the decision by Vitol, Glencore and Trafigura is unlikely to cut Tehran off completely from the global petrol market as traders said that Iran’s long-standing suppliers were being replaced by small Dubai-based and Chinese companies.

Although Iran is one of the world’s biggest oil producers, its refineries are dilapidated and it suffers from runaway petrol demand because of generous subsidies.

Energy executives said that Vitol, Glencore and Trafigura, which have hitherto sold Iran half of its petrol imports of 130,000 barrels a day, stopped supplying Tehran because of mounting political risk. “The political and public relations problems more than outweigh the business rewards,” said one executive.

The sale of petrol to Iran by non-US companies is legal as fuel imports have yet to be included in sanctions against the country. The companies declined to comment.

Vitol’s decision is particularly important as the company is by far the world’s largest oil trader. One executive familiar with Iran’s trade said “Vitol consciously decided not to participate in Iran’s tenders” at the start of the year. Trafigura, the Switzerland-based oil and metals trader, stopped selling to Iran about three months ago, an industry executive said. “They have concluded that there’s too much political and financial risk,” the executive said. Glencore stopped supply in late 2009, breaking a relationship with Iran of more than three decades.

The traders’ decision comes as both US houses of Congress have backed legislation to impose unilateral sanctions on companies that provide Iran with petrol as well as on insurers of such shipments, such as Lloyd’s of London. Supporters of the sanctions describe the petrol imports as “Iran’s economic Achilles heel”.

Oil groups such as Total of France, Lukoil of Russia, Petronas of Malaysia and Royal Dutch Shell also sold petrol to Iran last year. Chinese oil traders, including the secretive ZhenHua Oil, began supplying fuel to Iran last year and now provide up to a third of its imports.

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