* Big risk, big reward for oil and grain traders
* Libya heralded a return to roots for trading houses
* Rich pickings this year from Iran, Syria, Greece, Egypt
By Emma Farge and Jessica Donati
GENEVA/LONDON, July 25 (Reuters) - The Vitol oil trader dressed in heels picking her way through the armed rebels and pick-up trucks of post-war Tripoli had eyes only for the lucrative oil contracts up for grabs from Libya's new revolutionary government.
Her landmark deal for Vitol to export Libyan crude heralded the return of commodity houses to their swashbuckling roots, trading oil and grain with countries troubled by war and debt.
After years of backroom work focused on the dry business of building out storage, shipping and logistics operations, a small club of trading houses has jumped at the chance to land some old-fashioned big-profit deals.
They have had plenty of choice over the past year: war or unrest in Libya, Egypt, Syria, Yemen and South Sudan, sanctions on Iran, Greece on the brink of default.
"Trading houses are not shying away from places with high risk profiles if these profiles also lead to higher profit margins. It's about risk versus reward," said Ton Schurink at Geneva-based Commodity Finance Trading Advisory Services.
Vitol, Glencore, Gunvor and Trafigura in oil and Cargill, Louis Dreyfus and Bunge in grains have demonstrated that, for some at least, the security, credit and reputational risks are worth taking if the rewards are big enough.
Traders can operate in risky places because their business model is fundamentally different from the likes of BP or ExxonMobil.
Oil majors tend to be more wary of upsetting their home governments or shareholders and are bound to stricter rules when it comes to daily operations.
And because trading companies are mostly private, there is nobody to second-guess their internal decisions and more room for a star trader to take a bold initiative.
"Can you imagine someone at Exxon saying I'm just going to override that rule and send my tanker into pirate waters because it's a good trade? In a trading house, you don't have to listen to the model as it's privately owned," said an industry source working for a European oil firm.
Estimates from rivals suggest a trader who dares to sell grains to sanctions-straitened Iran could pocket $2 million profit per Panamax-size cargo as opposed to $200,000 if the cargo is sold to a low-risk buyer.
Premiums of at least $1.25 million were charged per diesel fuel cargo heading to unrest-prone Egypt in June this year, just days before the presidential election.
"Everyone has the same commodity to sell so you have to take risks to distinguish yourself and then manage them," said Robert Petritsch, Chief Financial Officer of Swiss-based Quadra Commodities.
Greece's credit rating is now worse than many African nations.
Perhaps not surprising then that many firms are cautious about supplying the partly state-owned Greek refiner Hellenic Petroleum with crude oil.
"If a country defaults, then it's a different ball game entirely. Credit dries up. So costs go up," said a trader with a Swiss-based trading house.
The prospect of default hasn't scared off Glencore and Vitol.
The two traders are estimated to have given Greece at least 300 million euros in open credit financing - meaning it does not need guarantees from banks to buy crude. Both firms declined to comment.
The financial might of big trading houses enables them to act as both bank and supplier to clients who have limited access to credit, at the expense of others who either cannot or will not take that risk.
"No doubt the credit comes at a cost and can possibly provide an interesting margin," said Schurink. A Swiss-based oil trader agreed: "Every company tight on credit is prepared to pay a premium to the market."
Industry sources said that the traders had probably also negotiated refined products or oil assets as collateral.
In a similar scenario, Egypt's military rulers sought record supplies of fuel for the summer months, trying to avoid a repeat of shortages that led to public anger earlier this year.
But difficulty obtaining payments for earlier purchases and other costly delays prompted some suppliers to think again before participating in the record tender.
In the end, Egypt purchased close to $1.2 billion worth of fuel from trading houses including Vitol and Glencore, paying above market prices ahead of the first presidential election and amid fears of renewed instability. Ag a in, both firms declined to comment on the deal.
"The premium is considerable - if the threat is real enough ... maybe 25 percent," said one trader with a firm that supplies fuel to Egypt.
A typical diesel cargo of 30,000 tonnes is worth some $25 million at current prices and so even a 5 percent premium would mean an additional cost of $1.25 million.
If in Libya traders bet on the rebels, in Syria the gamble was different.
Firms with investments there were reluctant to move out at first, but most dropped out as the death toll mounted and sanctions made it increasingly difficult to operate.
Around September 2011, Vitol and Trafigura abandoned the multi-million dollar Syrian market, but others like Switzerland's AOT Trading, Galaxy Group, based in Monaco, and Greek-based Naftomar exploited gaps in the sanctions regime.
This small pool kept the Syrian state supplied with diesel and heating gas for cooking throughout the winter, risking western opprobrium at a time when Assad's long-time allies Russia and Venezuela were the only other suppliers.
The deliveries were controversial not least because diesel is mainly used to power heavy vehicles including army tanks.
Naftomar, which supplied Syria with about $55 million a month of cooking gas, defended its position on the grounds its fuel may have prevented a worse humanitarian crisis.
Critics said that Naftomar, by delivering the fuel, might have been helping to extend Assad's rule.
Naftomar denied it was supporting Assad. "We were simply executing a contract that we had to sell LPG to a Syrian government related company. We stopped delivering to Syria when the sanctions were imposed," a Naftomar director said.
AOT and Galaxy Group did not respond to a request for comment.
EU sanctions targeting Syria's state-owned fuel distributor Mahrukat had forced trade to a halt by April this year.
Naftomar said that margins during the winter were "not excessive at all" and that it had since turned down requests to deliver fuel with "excellent" margins because of the embargo.
As in Syria, violence has deterred traditional suppliers from Yemen. Attacks on the energy infrastructure are costing up to $15 million a day in lost oil export revenue. Attacks on pipelines have halted flows to Yemen's, leaving the impoverished country even more dependent on imports.
Over the past year, Saudi Arabia has stepped in with donations worth hundreds of millions of dollars.
But when donations from Riyadh dried up Yemen became more reliant on Vitol and Trafigura for refined products supplies under long-term and spot deals.
"If you get it wrong, Yemen can lose you a lot more money," said a trader with experience of doing business with its government.
Both Vitol and Trafigura declined to comment.
Gripped by U.S. and European oil and banking sanctions, Iran has become a profitable trade for grains suppliers including U.S.-based Cargill and Bunge, France's Louis Dreyfus a