Plans for fresh US sanctions to isolate Tehran have sent shudders among Asian governments who fear they will have no way to pay for Iranian crude imports and face rising costs to fuel the region’s growing economies. Top buyer China, meanwhile, is looking to cash in on the pressure Tehran faces to snap up discounted Iranian crude. At stake is around 1.4 million barrels of oil that Iran ships to Asia every day, meeting 10 percent of demand from top buyers China and India.
South Korea, Japan and India are scrambling to find ways to keep the oil flowing. Any restriction on oil supplies from Iran, the world’s fifth-largest crude exporter, could drive up already high oil prices and threaten economies already facing the impact of the euro zone debt crisis. Japan is in talks with US diplomats about a possible waiver to US legislation that would make it more difficult to pay Iran. South Korea would also seek an exemption if the bill is signed into law, which US Congress expects to send to President Barack Obama as early as this week.
Existing sanctions do not penalise non-US refiners from buying Iranian crude, but they make it hard for foreign banks to pay Iran the hard currency that makes up around 50 percent of its government revenue. New US measures would make paying harder still by blacklisting the OPEC member’s central bank. EU leaders called for more sanctions against Iran by the end of January, in an effort to increase pressure on Tehran over its disputed nuclear programme.
The United States has assured all Asian buyers, including China, that it would work with them to ensure the global oil market remained well supplied, as Washington seeks to derail Tehran’s nuclear programme. It is unclear how the US hopes China would cooperate if Washington imposes another round of unilateral sanctions. Beijing has previously criticised measures imposed outside United Nations’ sanctions. Beijing is Iran’s biggest trade partner but there is no sign Tehran is using oil to keep China sweet.
Tehran is not budging on terms and wants Sinopec and state oil trader Zhuhai Zhenrong Corp to pay more and faster than it has done in 2011.
While Beijing looks to take advantage of political tensions, both Japan and South Korea struggle to balance their close alliance with the United States with their dependence on Iranian oil imports. US politicians have included a provision in the legislation to allow Washington to grant a waiver to countries that have helped US efforts to isolate Iran. Previous rounds of international sanctions mean it would be tough to find alternative payment channels, he said.
Those sanctions have blacklisted many other Iranian banks. South Korea, the world’s fifth-largest crude importer, wants to keep Iran’s central bank accounts open at two Korean banks, government officials said. Without them, it cannot pay for Iranian oil. If Seoul fails to achieve a waiver, it may seek a grace period to make new arrangements and avoid falling foul of the sanctions, they added.
