June 12, 2012 | Quote
China Is Excluded From Waivers for Oil Trade With Iran
WASHINGTON — Less than three weeks before stringent American sanctions intended to reduce Iran’s oil exports take effect, the Obama administration announced on Monday that it would exempt seven major importers of Iranian oil — but not China — from the measures because these countries had “significantly reduced” their oil purchases from Iran.
Administration officials said the United States was continuing to negotiate with China, the world’s No. 1 buyer of Iranian oil, after a confusing period in which Chinese purchases dropped sharply during a price dispute with Tehran but later rebounded.
Secretary of State Hillary Rodham Clinton announced that the administration had issued waivers to India, Malaysia, South Korea, South Africa, Sri Lanka, Turkey and Taiwan. They joined Japan and 10 European countries that the United States had previously said would be exempt from sanctions for six months.
“Today’s announcement underscores the success of our sanctions implementation,” Mrs. Clinton said in a statement. “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.”
Still, the absence of China from the waiver list indicates the hurdles the administration faces in persuading Iran’s largest customer to curtail its purchases. And it sets up a potential collision with China, which along with the United States is a member of the group of major powers that is negotiating with Iran over the future of its nuclear program.
Under legislation that President Obama signed in December, the United States must take action against countries that continue buying large volumes of crude oil through Iran’s central bank by cutting off from the American banking system the financial institutions engaged in those transactions in those countries.
China’s case is complicated, since oil analysts estimate that its purchases from Iran declined by a third during the first quarter of 2012. China was in a price dispute with Iran, however, suggesting that it was cutting back as a negotiating tactic. In April, its purchases spiked again, and the upswing continued into June. There are also reports that China has been buying oil covertly from Iran.
Administration officials noted that China had played a constructive role in the nuclear talks with Iran and voted for United Nations sanctions against Iran, even as they acknowledged that China had reservations about the sanctions’ effectiveness.
“We’ve been able to work through sanctions-related issues with China in the past, and our hope is that we’ll be able to do the same with China over the next few weeks,” said a senior administration official, who spoke on the condition of anonymity because of the delicacy of the talks.
The sanctions law gives Mr. Obama two other escape hatches: he can delay the enforcement of the measures if he concludes they are disrupting the oil market, or he can issue China a waiver based on national security considerations.
On Monday, however, the White House issued a statement saying the global oil supply had loosened somewhat in April and May, after a tight period early in the year. That clears the way for full implementation of the sanctions at the end of June.
In the statement, the White House press secretary, Jay Carney, said, “There currently appears to be sufficient supply of non-Iranian oil to permit foreign countries to significantly reduce their imports of Iranian oil.” He noted that many of Iran’s customers had cut back their purchases and tried to find alternative suppliers.
The administration’s action seems calculated to keep up the pressure on Iran a week before the next round of nuclear talks is scheduled to take place in Moscow. After meetings in Istanbul and Baghdad, the talks have bogged down over demands that Iran suspend its enrichment of uranium to 20 percent and that it shut down the Fordow enrichment facility.
Experts on sanctions said they were not surprised by the administration’s decision to withhold an exemption from China.
“They don’t want to issue the exception to China now, and then face pressure to revoke it in the next 180-day period,” said Mark Dubowitz, executive director of the Foundation for Defense of Democracies and an expert on Iranian sanctions. Even if the volume of China’s oil purchases does not decline, some experts predict that China might be able to comply with the American sanctions by arguing that it is paying a lower price for the oil, depriving the Iranian government of much-needed revenue. China is also using channels to buy oil that go around the Central Bank of Iran, which could give it a loophole to keep buying oil without triggering the sanctions.
Despite the White House’s decision not to exempt China, Republicans in Congress criticized the exemptions it did grant.
“While many of our allies are doing the right thing by significantly decreasing crude oil purchases from Iran, those who are violating the law must be held to account,” Representative Ileana Ros-Lehtinen of Florida, the chairwoman of the House Foreign Affairs Committee, said in a statement. “There remains much that needs to be done to tighten the screws on Iran, and once again Congress will have to lead the way.”
Senator Robert Menendez, a New Jersey Democrat and a sponsor of the Iranian sanctions legislation, said he would reserve judgment on the latest waivers. But in a statement that also referred to the European Union, he said that since the president signed the law, “Iran is estimated to have lost approximately $10 billion in oil revenue, the Iranian currency has plummeted, and oil output has fallen to a 20-year low — and that is all before the U.S. and E.U. sanctions go into effect later this month.”