China, India, Japan and South Korea buy most of the one million barrels per day of crude Iran is able to export despite financial, shipping and insurance sanctions aimed at curbing funds for its civilian nuclear program.

After a lull in imports in the middle of the year caused by Asian refineries reducing purchases as sanctions kicked in, analysts expect shipments to rise in August and September.

But on average, imports are likely to remain steady until the end of the year, unless the United States and the European Union come up with fresh sanctions to curb Iran’s earnings.

“I don’t expect shipments to Asia to fall much further during the second half of the year, but don’t expect them to increase much either,” said Trevor Houser, a partner at the New York-based Rhodium Group and a former State Department adviser.

At current prices, Iran is losing some $110 million a day in export earnings compared with the start of the year.

Japan more than doubled its August loadings to 7 million barrels compared with July to make up for disruptions through the middle of the year, while India is expected to follow suit and load 2 million barrels at most, industry sources say.

China, Iran’s biggest oil customer and trading partner, kept August loadings unchanged from July at 8 million barrels.

Even though global markets are awash with crude, Iranian oil has retained its appeal with discounted prices, easier trade financing terms and because its grade of high-sulphur oil is well suited to many refineries.

Earlier this year, the United States granted allies Japan, South Korea and India a waiver from financial sanctions after they reduced purchases from Iran by around 15 percent in the first half of the year from year earlier levels.

China was given a U.S. waiver after imports fell by more than 20 percent during the same period compared to a year earlier due to a dispute over contract terms with Iran.

The lack of cover prompted South Korea to halt shipments from Iran in July. Its loadings are set to resume in September after Korean refiners decided to follow counterparts in China and India and ask Iran to deliver crude on its own tankers, shifting responsibility to Iran for insurance.

So far, only Japan is providing refiners with government-backed insurance of up to $7.6 billion to ship Iranian oil. India’s state-run insurers can provide some limited cover.

Brent crude rose to a near four-year high of $128 a barrel in February, largely on worries about the loss of Iranian supplies.

“I doubt we’ve seen the end of pressure on Asian consumers to avoid Iranian crude,” said John Vautrain, an independent Bangkok-based energy consultant.

The United States is due to review the waivers it granted Iranian oil buyers in the months ahead, and will only renew them if nations show a consistent decline in purchases.

“A single month is not going to be the deciding factor,” U.S. Deputy Energy Secretary Daniel Poneman said last month.

The temptation to take on more Iranian crude is strong, but Asian buyers are wary of the political risks. “What’s the extra incentive for taking that kind of extra risk? We always like to toe a middle line,” said a Chinese trader dealing with Iran, who declined to be identified because of the sensitivity of the subject.

Ken Koyama, a director at the Institute of Energy Economics of Japan, agreed.

“I think Asian buyers will maintain the basic downtrend in imports to balance their own needs with the pressure from the U.S. and Europe,” Koyama said.

3 Comments on "Asian oil buyers help Iran move away sanctions"

BillT on Mon, 13th Aug 2012 10:12 am 



And the beat goes on…Iran is giving the finger to the Empire along with China, Japan, India, Brazil, Venezuela, and others. Today, a US navy ship hit an oil tanker in the Strait … lol. What if the US closes the Strait with it’s stupidity, taking down the world economy and the Empire? ^_^

Arthur on Mon, 13th Aug 2012 1:03 pm 



The West is bluffing and Iran knows it. When we remember that the oil boycott of the US and the Netherlands in 1973 (we could roller skate over the highways during ‘autoloze zondagen’) caused a shock that prompted a boom in searching for alternatives, maybe a second oil boycott by Iran to the West could be benificial in that it could prompt the West to change course, because they have to.

Plantagenet on Mon, 13th Aug 2012 6:30 pm 



The sanctions on Iran are only two months old, and already its clear they have failed.