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Nations may keep sanctions exemption for cutting Iran oil

Bloomberg

By Indira A.R. Lakshmanan

Oil-importing nations are continuing to cut back their purchases from Iran, making it likely those countries will earn a new round of exceptions from U.S. sanctions next week.

Two U.S. officials said yesterday that publicly available oil trading figures indicate that the seven nations whose waivers are up for renewal on Dec. 8 have continued to significantly reduce their Iranian oil imports over the last 180 days.

The Obama administration certified six months ago that India, Turkey, South Korea, Sri Lanka, Taiwan, Malaysia and South Africa had “significantly reduced” their purchases of Iranian oil, in keeping with a December 2011 law that imposes U.S. sanctions on foreign financial institutions that facilitate oil transactions with Iran.

On Dec. 8, those 180-day exceptions from sanctions will expire, and the administration must certify whether the countries have continued to reduce their purchases and qualify for a renewal.

Malaysia and South Africa have stopped importing oil from Iran, and the other five nations appear to have continued to reduce their purchases, putting them on track to earn a second round of exceptions from sanctions if all the figures are certified, the officials said. The officials spoke on condition of anonymity since the final decision by Secretary of State Hillary Clinton hasn’t been made and relies on data other than publicly available trade figures.
U.S. Law

All 20 nations that imported Iranian oil last year, including 10 European Union countries, China and Japan, were able to show a significant reduction in their imports earlier this year, allowing them to continue buying smaller quantities of Iranian oil without facing sanctions. The EU imposed an embargo on all oil purchases from Iran that took effect July 1.

U.S. Senators Bob Menendez, a New Jersey Democrat, and Mark Kirk, an Illinois Republican, were the architects of a year-old U.S. law that curtailed Iran’s oil exports and revenues to pressure the Islamic Republic to make concessions over its disputed nuclear program. The U.S., European Union and Israel say Iran is secretly pursuing a nuclear weapons capability. Iran says its nuclear program is strictly for civilian energy and medical research.
Exports Drop

The December 2011 law cuts off from the U.S. banking system any foreign financial institution that handles oil trade with Iran if their home country hasn’t earned an exception from sanctions by reducing its oil imports.

The International Energy Agency said Iranian oil exports dipped below 1 million barrels a day in July after the European Union banned purchases of the country’s crude. The Paris-based IEA estimates that Iranian exports rebounded to 1.3 million barrels in October.

Iran’s oil output, formerly the second-largest in OPEC, has dropped to fifth among the 12 members of the Organization of Petroleum Exporting Countries as a result of economic sanctions imposed by the U.S. and its allies.

In the first half of 2011, China was the biggest importer of Iranian crude, followed by the European Union, Japan, India and South Korea, according to the U.S. Department of Energy.

Oil capped its first monthly increase since August on signals that economic expansion in the U.S. is accelerating. Crude oil for January delivery advanced 84 cents to $88.91 a barrel yesterday on the New York Mercantile Exchange, the highest settlement since Nov. 19. Futures increased 0.7 percent this week and gained 3.1 percent this month. Prices are down 10 percent this year.