SEOUL, March 22 — South Korea cut imports of Iranian crude in the first two months of 2012 and Taiwan plans to halt its purchases from July as the two join the growing list of countries reducing imports under pressure from the United States.
The quartet of South Korea, China, India and Japan are the four biggest buyers of Iranian crude in Asia and have either made a cut in imports or pledged to do so. Iran sells most of its 2.6 million barrels per day (bpd) of exports in Asia.
The US on Tuesday exempted Japan and 10 EU nations from financial sanctions because they have significantly cut purchases of Iranian crude, but left out ally South Korea and Iran’s top customers China and India.
South Korea’s refiners were cutting imports to ensure the government could petition the US for a sanctions waiver, a source at South Korea’s economy ministry said today.
“South Korea is cooperating at a fundamental level with the US regarding Iranian crude oil imports,” the source said. “I think refiners are making efforts to help South Korea receive an exemption from the United States.”
The world’s fifth-largest oil importer, South Korea bought 15 per cent less Iranian crude in the first two months of the year compared with the same period in 2011, even though overall crude imports increased by 3.4 per cent on the year.
Iranian crude imports fell to 12.9 million barrels, or 215,483 barrels per day (bpd), in January and February from 15.04 million barrels, or 254,831 bpd, a year earlier, state-run Korea National Oil Corp (KNOC) said today.
Buyers of Iranian crude will face US sanctions if they fail to cut purchases significantly. The US is using sanctions to put pressure on Iran to halt its nuclear programme, which Washington says Tehran is using to develop weapons. Iran says it needs nuclear-generated power.
EU sanctions have also made buying Iranian crude more difficult as they penalise insurers for indemnifying Iranian crude cargoes anywhere in the world.
Japan’s imports in February could fall by as much 70 per cent on average for 2011 due to difficulty in getting insurance, the Nikkei daily said today.
A delegation from Seoul will meet US officials soon to discuss the depth of the cut in Iranian crude imports that Washington would like to see South Korea make. Officials from both sides have declined to comment on the depth of the cut under discussion.
If Japan is any measure, the cut would need to be 15-22 per cent.
Carlos Pascual, US State Department Special Envoy and Coordinator for International energy Affairs, held up Japan’s cut as an example for other nations but equally declined to set a benchmark that countries could follow to secure an exemption.
With the reduction in January and February, South Korea has reversed what was a trend toward increasing Iranian oil purchases. In 2011, its Iran imports rose 20 per cent.
Taiwan will halt its imports from July, a source at state-run refinery CPC said today.
Taiwan is a small buyer of Iranian crude, purchasing between 19,000 and 22,000 bpd. It was on a list of Iranian crude buyers potentially subject to sanctions, a US State Department official said on Wednesday.
Few problems, cost burdens
South Korea has had no problems finding oil to substitute for Iranian imports, the country’s finance minister Bahk Jae-wan told reporters today.
“We already have secured enough alternative oil,” Bahk said after an industry event.
Taiwan had no plans to ask for the US waiver to sanctions, as it would simply buy crude from other countries, CPC President Lin Mao-wen told Reuters today.
Top oil exporter Saudi Arabia said this week it would plug any shortage in supplies to the market and was ready to raise output to full capacity of 12.5 million bpd if needed.
South Korea sourced 87 per cent of its total crude imports in the first two months of this year from the Middle East — mainly Saudi Arabia, Kuwait, Qatar, the United Arab Emirates and Iran — up from 85 per cent a year earlier, KNOC data shows.
Cutting imports from Iran might drive up the country’s overall import costs, said Son Young-joo, energy analyst at Kyobo Securities Co Ltd.
“I don’t think the shortage of Iran crude oil supply itself will do much harm to South Korea,” he said. “The only problem I see is the cost, as Iran crude oil was about US$2 (RM6.16) to US$3 a barrel discounted compared to other countries’ products.”
KNOC data also showed crude imports by South Korea jumped 14.2 per cent in February from a year earlier to 80.82 million barrels. From Iran, Seoul imported 5.90 million barrels last month, up 3.8 per cent from a year earlier, the data showed.
The rise in both figures last month could be attributed to the extra day in February this year. — Reuters