The knowns and un­knowns of U.S. Iran oil sanc­tion waivers

The Daily Star (Lebanon) - - BUSINESS -

The United States Mon­day reim­posed sanc­tions against Iran’s oil ex­ports to pun­ish Tehran for its in­volve­ment in sev­eral Mid­dle Eastern con­flicts.

Wash­ing­ton had been push­ing gov­ern­ments to cut im­ports of Ira­nian oil to zero. But, fear­ing a price spike, it granted Iran’s big­gest buy­ers – China, In­dia, South Korea, Ja­pan, Italy, Greece, Tai­wan and Turkey – sanc­tions waivers.

That will al­low the eight, which ac­count for about 75 per­cent of all Iran’s oil ex­ports, ac­cord­ing to trade data, to im­port at least some oil for an­other 180 days.

Wash­ing­ton and the re­cip­i­ents of the waivers have not dis­closed how much oil they are al­lowed to im­port, or un­der what con­di­tions deals can still be made.

Bern­stein En­ergy ex­pects “Ira­nian ex­ports will aver­age 1.4-1.5 mil­lion bar­rels per day dur­ing the ex­emp­tion pe­riod,” down from a peak of al­most 3 mil­lion bpd in mid-2018.

JPMor­gan said “the lack or dif­fi­culty in ac­quir­ing ship­ping in­sur­ance will help in re­duc­ing ex­ports quickly as they did dur­ing last in­ter­na­tional sanc­tions.”

The U.S. bank also said “pay­ments for the oil by the ex­empt coun­tries must go into es­crow ac­counts in their lo­cal cur­rency” and that this “means the money won’t di­rectly go to Iran and it can only be used to buy cer­tain non­sanc­tioned goods from its crude ex­port cus­tomers.”

Once the waivers ex­pire af­ter 180 days, new waivers are ex­pected to be is­sued, with a source in China say­ing his coun­try would likely re­ceive an­other six months of ex­emp­tions, though at a lower rate of around 220,000 bpd.

CHINA

China, the world’s big­gest im­porter of crude oil, is also the top buyer of Ira­nian oil, and its mostly state-owned re­fin­ers have lob­bied hard for waivers.

Sev­eral Chi­nese sources with knowl­edge of the mat­ter said China would be al­lowed to buy 360,000 bpd of Ira­nian crude dur­ing the ex­emp­tion pe­riod of 180 days. That would be about half the daily aver­age China has been im­port­ing from Iran since Jan­uary 2016, trade data showed.

How­ever, one source said the U.S. had at­tached strings to the waivers, in­clud­ing coun­ter­party dis­clo­sures and lay­ing open set­tle­ment meth­ods, which were be­ing eval­u­ated be­fore plac­ing new or­ders with Iran.

Mean­while, China Na­tional Pe­tro­leum Corp. is still tak­ing oil from Ira­nian fields in which the CNPC has own­er­ship stakes, ac­cord­ing to a com­pany ex­ec­u­tive.

Oil that Chi­nese com­pa­nies have ac­cess to as part of their as­sets in Iran does not fall un­der the vol­umes China is al­lowed to im­port un­der the waiver, he said.

IN­DIA

In­dia is the world’s third-big­gest oil im­porter. It is also Iran’s sec­ond­biggest oil cus­tomer and will be one of the most ex­posed to a forced drop in sup­ply be­cause of its rel­a­tive prox­im­ity to Iran.

One In­dian source close to the coun­try’s re­fin­ing sec­tor said In­dia would likely be al­lowed to im­port around 300,000 bpd of Ira­nian crude dur­ing the ex­emp­tion pe­riod com­pared with nor­mal vol­umes of around 450,000-550,000 bpd.

SOUTH KOREA

South Korea is a large buyer of Ira­nian con­den­sate, a su­perlight form of crude oil, used by its large petro­chem­i­cal in­dus­try.

A close U.S. ally, South Korea had stopped buy­ing crude from Iran ahead of the sanc­tions while still lob­by­ing for ex­emp­tions.

This week, re­ports emerged that South Korea re­ceived a waiver al­low­ing it to im­port around 4 mil­lion bar­rels a month – equal to about 130,000 bpd – of Ira­nian crude and con­den­sate.

South Korea has av­er­aged over 200,000 bpd of oil im­ports from Iran so far this year, down from around 350,000 bpd in 2017.

Bank­ing sources said any Korean pay­ments for Ira­nian oil would need to be made in its won cur­rency.

The won-de­nom­i­nated pay­ments will go into es­crow ac­counts han­dled by the In­dus­trial Bank of Korea and Woori Bank.

Of­fi­cials from both banks said, how­ever, that won-de­nom­i­nated pay­ments for Ira­nian oil were still be­ing re­viewed, and that no sched­ule a for re­sump­tion was set yet.

JA­PAN

Ja­pan, an­other key Asian U.S. ally, also ceased Ira­nian oil im­ports prior to the sanc­tions, but has re­ceived a waiver to im­port an undis­closed amount of oil from Iran in the next 180 days.

Ja­panese Trade Min­is­ter Hiroshige Seko said Tues­day that Ja­panese buy­ers were ex­pected to re­sume im­ports from the Is­lamic Repub­lic again soon.

Re­fin­ing sources in Ja­pan, how­ever, said they first needed to eval­u­ated the con­di­tions at­tached to the waivers, with no new or­ders likely be­fore De­cem­ber.

TAI­WAN

Tai­wan is only an oc­ca­sional im­porter of Ira­nian oil, and no de­tails re­gard­ing its waivers have been dis­closed.

TURKEY, ITALY, GREECE

Italy and Turkey have been im­port­ing around 200,000 bpd of oil from Iran over the past two years, with Greece im­port­ing less than 100,000 bpd.

Italy and Greece have com­pletely sus­pended pur­chases in re­cent weeks. The waivers for those coun­tries took the mar­ket by sur­prise and trad­ing sources have said they are now eval­u­at­ing prospects for re­sum­ing some im­ports. Turkey has said it is also eval­u­at­ing pos­si­ble im­ports af­ter re­ceiv­ing a waiver, but Pres­i­dent Re­cep Tayyip Er­do­gan said Tues­day the coun­try would not abide by the sanc­tions. –

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