The US added seven economies to the list of nations qualifying for an exemption from financial sanctions on Iranian oil imports, penalties intended to pressure Iran’s leaders to abandon any nuclear weapons ambitions.
India, South Korea, Turkey, South Africa, Malaysia, Sri Lanka and Taiwan will not be penalised by the US for continuing to import oil from Iran over the next six months because they have proven they “have all significantly reduced” the volume of the oil they buy from Iran, Secretary of State Hillary Clinton said in a statement on Monday.
Oil prices fell for a fourth day in New York on speculation that the US exemptions will limit the risk of global supply disruptions. Crude for July delivery dropped as much as two per cent to $81.07 (Dh297) a barrel in electronic trading on the New York Mercantile Exchange, extending its loss this year to 17 per cent.
China, the leading importer of Iranian crude in the first half of last year, and Singapore were not granted exemptions. US officials familiar with the decision said talks are continuing, and they may win exemptions before the June 28 deadline for the sanctions to take effect. China imports crude from Iran based on its economic needs and has told the US that its actions are “completely fair and transparent,” Foreign Ministry spokesman Liu Weimin told a briefing on Tuesday.
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“China didn’t breach UN Security Council resolutions or cause harm to the international community or other countries,” Liu said. “We believe China’s crude oil trade is completely lawful and reasonable.”
Singapore is engaged in “constructive discussions” with the US and has asked its financial institutions to more closely monitor transactions involving Iran, according to a statement from the Ministry of Foreign Affairs. While Singapore enforces only Security Council sanctions, “companies and financial institutions know they must consider the impact of unilateral sanctions on their commercial decisions,” it said.
Singapore imported one per cent of its crude from Iran in the last two years and none in May, according to the statement.
India and South Korea were the third- and fourth-largest buyers of Iranian oil in the first half of last year, according to the US Department of Energy.
“By reducing Iran’s oil sales, we are sending a decisive message to Iran’s leaders: until they take concrete actions to satisfy the concerns of the international community, they will continue to face increasing isolation and pressure,” Clinton said.
Analysts interviewed on Monday said that whether China, the world’s largest energy consumer, ultimately reduces its purchases of Iranian oil may not make much difference in the oil revenues earned by the state, since every other major buyer has substantially scaled back imports.
“As an increasing number of Iranian customers cut back, it becomes less important that Beijing follow suit,” Trevor Houser, an energy analyst and partner at the Rhodium Group, a New York-based economic research firm, said in an interview. “Faced with fewer options to market its crude, Tehran will have to offer significant discounts or attractive payment terms to keep Chinese and other buyers at the table.”
Houser said there’s also an advantage to oil markets if the Chinese continue to buy Iranian crude. “Keeping some Iranian oil on the market can help mitigate the risk of a rebound in oil prices as we head into the summer driving season,” he said.
In addition to the seven economies named on Monday, the US granted renewable, 180-day exemptions on March 20 to Japan and ten European Union nations. The EU collectively was the second-largest buyer of Iranian oil in the first half of 2011. As a single country, Japan ranked second, according to the US Energy Department.
Under the US law enacted December 31, nations have until June 28 to demonstrate they have “significantly reduced” the volume of their Iranian crude purchases. If they fail to do so, their banks that settle oil trades with Iran will be cut off from the US financial system.
President Barack Obama’s administration hasn’t defined what constitutes a significant reduction, and three US officials said they were weighing a number of factors, including each nation’s energy needs and ability to switch to alternative sources. The officials spoke on condition of anonymity to discuss internal deliberations.
The sanctions are part of a coordinated campaign by the US and EU to ratchet up economic pressure on Iran over its disputed nuclear programme.
US officials pointed on Monday to figures from the International Energy Agency in Paris showing a decline in Iran’s oil exports as proof that the sanctions campaign is working. The IEA reported that Iran exported 2.5 million barrels of crude a day last year; the independent agency estimates that figure has dropped to between 1.2 million and 1.8 million barrels per day, US officials said.
Oil has declined 22 per cent since the start of May as concerns over supplies and potential military conflict have diminished. The US is one of six world powers including China, Russia, the UK, France and Germany that are engaged in negotiations with Iran over its nuclear programmes.