US exempts 11 states from Iran sanctions

Japan exempt after Iran import cuts of 15-22%; 10 EU states who imported Iran crude also exempt; US list does not include buyers China, India, Korea

By REUTERS
March 21, 2012 11:34
4 minute read.
petrochemicals plant in Assaluyeh, Iran

petrochemicals plant in Assaluyeh, Iran_390. (photo credit: Reuters)

WASHINGTON- The United States exempted Japan and 10 EU nations from financial sanctions because they have significantly cut purchases of Iranian oil, but left Iran's top customers China and India exposed to the possibility of such steps.

The decision means banks in these countries have been given a six-month reprieve from the threat of being cut off from the US financial system under new sanctions designed to pressure Iran over its nuclear program.

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The list did not include China and India, Iran's top two crude oil importers, nor US allies South Korea and Turkey, which are among the top-10 consumers of Iranian oil.

Japan, China and India combined buy close to half of Iran's crude exports of 2.6 million barrels a day, providing crucial foreign exchange for the OPEC member.

But the US sanctions and an EU oil embargo have cut Iran out of financial networks, making it difficult to transfer funds to pay for trade and disrupting some oil shipments because of the difficulty of securing shipping insurance. Domestic prices in Iran have spiraled higher and the rial has slumped in value.

Japanese Finance Minister Jun Azumi welcomed the US decision, saying on Wednesday that Japan would continue to cut its imports of Iranian oil at a set rate in the future.

"The decision takes account of Japan's steps on Iranian oil, including its future response," he told reporters.

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Indeed, the Japan government wants the nation's crude buyers to cut Iran imports by 10 percent to 20 percent a year, Akihiko Tembo, the chairman of the Petroleum Association of Japan, said.

A US official held up Japan's estimated 15-22 percent cut in oil purchases from Iran in the second half of last year as an example for other nations.

"Japan was a model," Carlos Pascual, State Department Special Envoy and Coordinator for International Energy Affairs, told lawmakers, noting the cuts were made even after the country suffered an earthquake that caused a civil nuclear disaster.

"If Japan was able to do what it did ... that should be an example to others that they could potentially do more."

Still, Pascual declined to set a benchmark that countries could use to secure an exemption. The law says they must "significantly reduce" Iranian oil imports and continue to do so to win exemptions, he said.

Underlining US efforts to tighten the financial noose around Iran, a state department official said 12 other countries may eventually be subject to US sanctions unless they cut Iran crude purchases. He did not list them.

South Korea will hold another round of talks soon with the United States on significantly reducing its imports from Iran, a source at the Korea's economy ministry said on Wednesday.

In contrast to Japan, South Korea, the world's fifth-largest oil importer, increased its imports from Iran in 2011 by 20 percent. It's refiners have signed deals to import a little more crude again from Iran in 2012.

South Africa's energy minister said last week he hoped to have a plan by the end of May for replacing Iran supplies, which currently make up a quarter of its crude imports.

But reflecting a problem for several countries, Turkey's energy minister, Taner Yildiz, told reporters on Wednesday the country could not stop buying Iran crude unless alternative oil sources were found.

The 10 nations from the European Union, which has already decided to stop importing Iranian oil from July, were Belgium, Britain, the Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland and Spain, the State Department said.

"The actions taken by these countries were not easy," US Secretary of State Hillary Clinton said in a statement. "We commend these countries for their actions and urge other nations that import oil from Iran to follow their example."

While China and India and others remain exposed to possible financial sanctions, US law gives President Barack Obama the ability to waive such steps if this is in the national interest.

China, Iran's top trade partner and crude buyer, has made it clear that it rejects in principle the unilateral US sanctions, while trying to maintain its energy ties with Tehran. It says Washington and the EU should not go beyond UN resolutions on Iran.

Still, China slashed Iranian crude imports by more than half in the first quarter of 2012 as China's largest refiner Sinopec put pressure on Iran's state oil company to protest against tougher contract terms proposed by Tehran.

Those cuts, if averaged out over the full year, amount to a reduction of around 14 percent of the volume China imported on contract in 2011.

India's government says it is not under any obligation to observe US sanctions, but privately has asked its refineries to cut Iran imports by at least 15 percent, industry sources have said.


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