Reuters: The United States is likely to exempt India, South Korea, Turkey and others from Iranian financial sanctions for another six months on Friday as a reward for reducing crude purchases from the Islamic republic, two U.S. government sources said. By Timothy Gardner
WASHINGTON (Reuters) – The United States is likely to exempt India, South Korea, Turkey and others from Iranian financial sanctions for another six months on Friday as a reward for reducing crude purchases from the Islamic republic, two U.S. government sources said.
Oil shipments by Iran have more than halved in 2012 in the face of U.S. and European Union sanctions aimed at cutting Tehran’s foreign exchange earnings and funding for a nuclear program they suspect is designed for a military purpose. Iran denies that the program is for nuclear weapons.
The U.S. sanctions, which target financial transactions, have gradually tightened the noose on Iran’s crude sales. But exports took a deep hit in July when EU sanctions kicked in, largely because they effectively, overnight, banned insurance cover on ships carrying Iranian crude.
The sanctions have sharply curtailed the market for Iranian crude, with Asian buyers and Turkey the only customers this month, according to shipping sources. EU sanctions included a ban on members from buying Iranian crude.
The International Energy Agency (IEA) estimates that Iranian oil exports dipped below 1 million barrels per day (bpd) over the summer as Western sanctions on Tehran tightened.
According to official Iranian government data available through the Joint Oil Data Initiative (JODI), Iran exported an average of just over 2 million bpd in 2011.
On June 11, a number of countries received their first round of reprieves from U.S. sanctions that President Barack Obama signed into law a year ago. The waivers are issued by the State Department.
Under the law, banks in countries that buy oil from Iran can be cut off from the U.S. financial system unless their purchases are reduced.
The architects of U.S. sanctions legislation, Democratic Senator Robert Menendez and Republican Senator Mark Kirk, have urged the White House to require oil importers to reduce purchases by 18 percent or more to qualify for further exemptions.
U.S. waivers for China, the top consumer of Iran’s oil, and Singapore are due to expire on December 25, 180 days after they were issued. Both countries are expected to get waiver extensions because they have reduced oil purchases from Iran. Those waivers could also be issued on Friday, one of the government sources and an oil industry source said.
“There’s nothing in the sanctions law that says the U.S. has to wait a full 180 days to announce exceptions for China,” said the government source, who asked not to be named because of the sensitive nature of the matter.
Japan and 10 EU countries received six-month sanction reprieves from the United States in September.
The West suspects that Iran’s nuclear program is enriching uranium to levels that could be used in weapons. Tehran has said that the program is for the generation of electricity and medical purposes.
David Cohen, undersecretary for terrorism and financial intelligence at the U.S. Treasury Department, said this week the mix of sanctions was costing Iran up to $5 billion a month.
The United States and the EU say the sanctions are targeted at the government and not ordinary citizens, although the rial has dropped sharply in value and forced up food prices so that Iranians can not always afford even basic items.
Still, the West has been ramping up sanctions further as worries mount about Tehran’s nuclear intentions and to try to calm concerns in Israel, which has threatened to attack Iranian nuclear installations if a peaceful solution is not found.
Shipping sources say Iran’s crude exports are set to drop by about a quarter in December from November and to the lowest level since the sanctions were imposed this year, representing a loss of about $800 million at current prices.
EU sanctions mean that major buyers China, South Korea and India ask Iran to ship the oil to them because they are unable to secure insurance cover for vessels.
Delivery has often been delayed because the Iranian fleet is severely stretched, with an increasing number of its tankers being used as floating storage for unsold oil.
The sanction will leave Asia’s 2012 Iranian crude imports at just over 1 million bpd, down roughly a quarter from a year ago, Reuters calculations show.
As Iran’s biggest buyers of Iran crude, Asian countries lobbied hard for exemptions to the sanctions for fear that a loss of the crude would force prices higher and undermine economic growth. Many Asian refiners are also designed to handle Iranian crude, and would require costly reconfiguring if they were to give up the grade substantially.
China, the world’s second-largest oil consumer, has also repeatedly voiced its opposition to unilateral sanctions, such as those imposed by the United States. It says measures should be multilateral and agreed through the United Nations.
Still, China’s imports have fallen in recent months as Iranian tankers struggled to ship even the reduced volumes requested by importing countries. Earlier this year, China slashed imports by as much as half as the country wrangled over annual contract terms with Tehran.
China’s imports from Iran are down 22 percent on the year to 426,000 bpd in January-October, the months for which official data is available.
South Korea has reduced purchases 39 percent to 148,000 bpd and Japan 41 percent to 188,000 bpd over the same period. In contrast, India has raised imports to 328,000 bpd, up 7 percent.
(Reporting by Timothy Gardner; Editing by Gerald E. McCormick and Toni Reinhold)