June 12, 2012 | Quote
US Exempts India, South Korea From Iran Oil Sanctions
No U.S. Definition
President Barack Obama’s administration hasn’t defined what constitutes a significant reduction, and three U.S. 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 U.S. and EU to ratchet up economic pressure on Iran over its disputed nuclear program.
U.S. officials pointed yesterday 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, U.S. officials said.
Oil has declined 22 percent since the start of May as concerns over supplies and potential military conflict have diminished. The U.S. is one of six world powers including China, Russia, the U.K., France and Germany that are engaged in negotiations with Iran over its nuclear programs.
Price Premium
“There was a definite Iran premium in price, but increasingly the Saudis and others have ramped up production,” said John Kilduff, a partner at Again Capital LLC, a New York- based energy hedge fund. “That has really neutralized the worries that arose over sanctions.”
Iraq boosted output by 8.7 percent this year through May to 2.935 million barrels a day, while Libya increased production to 1.4 million barrels a day, the highest since January 2011, according to data compiled by Bloomberg. Saudi Arabia pumped 9.9 million barrels a day in May, up 16 percent from 8.5 million barrels a day in March, the data show.
U.S. Senator Robert Menendez, a New Jersey Democrat who was one of the principal sponsors of the legislation that imposed financial sanctions on Iranian oil imports, said in an interview that the administration’s announcement “sends a message to Iran that our intent is to fully implement these sanctions, and delays and half-measures by Iran that don’t address the totality of Iran’s nuclear weapons program will be met with even further action by the United States.”
China Issues
Iran is the No. 2 producer in the Organization of Petroleum Exporting Countries, and earns more than half of its government revenue from oil sales, according to the International Monetary Fund.
Taiwanese, Korean and Turkish oil imports from Iran since the sanctions law was enacted are down 20 percent, 10 percent and 6 percent year-on-year respectively, according to each country’s customs data and various tanker tracking services monitored by Rhodium, Houser said.
China didn’t receive an exemption even though, he said, it cut imports from Iran by 30 percent in the same period. “That’s because the drop in Iranian shipments to China was the result of a commercial price depute, not a decision by Beijing to buy less, and that price dispute has since been solved,” he said.
The reason China was not included “may be because the Obama administration is unsure about China’s intentions with respect to future crude purchases from Iran,” said Erica Downs, a specialist on Chinese energy at the Brookings Institution, a policy center in Washington.
Public Indications
“There have not been any public indications from Chinese officials or oil executives that they intend to reduce oil purchases to support U.S. sanctions,” she said in an interview from Shanghai. “It would be difficult for the Obama administration to justify an exemption for China at a time when China’s crude imports from Iran are rising, even if they are still below last year’s average.”
Mark Dubowitz, director of the Iran Energy Project at the Foundation for Defense of Democracies in Washington, said in an interview that China might still earn an exemption.
Dubowitz, who has advised the administration and Congress about sanctions, said it’s his understanding that if China extracts deep discounts from Iran on the crude it buys from the Persian Gulf state, it might get a waiver for helping to achieve the end-goal of the sanctions: depriving Iran of its main source of revenue.