More U.S. waivers to Iran sanctions likely next week

SINGAPORE/WASHINGTON Fri Jun 8, 2012 1:14am IST

Motorists wait at a petrol pump to fill petrol in Lucknow June 7, 2010. REUTERS/Pawan Kumar

Motorists wait at a petrol pump to fill petrol in Lucknow June 7, 2010.

Credit: Reuters/Pawan Kumar

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SINGAPORE/WASHINGTON (Reuters) - The United States will announce a new list of countries that will receive exceptions to financial sanctions on oil trade with Iran as soon as early next week, a government official said on Th ursday.

Not all of Iran's oil buyers are likely to get the waivers, said the source, who declined to elaborate. Around two thirds of Iran's crude exports flow to Asia, where the biggest buyers are China, Japan, India and South Korea.

The United States granted Japan an exception in March and has signaled it has had good talks with South Korea about reducing oil purchases. Refiners in South Korea will switch to other sources on July 1, industry sources have said.

But the U.S. may withhold waivers for China and Singapore, according to an advocate of tougher sanctions on Iran, stepping up pressure on Iran's biggest crude oil buyer and a major destination for its fuel oil exports.

Mark Dubowitz, the advocate and head of the Foundation for Defense of Democracies, said he expected all of Iran's other oil buyers would eventually get the exceptions.

He believes China has received some clandestine cargoes from Iran. Tehran has withheld the destination of some oil shipments by disabling tracking systems on its tanker fleet, according to shipping and trading sources.

The United States would be better off delaying a decision on China, he said, than to grant an exception now and be forced not to renew it later when more evidence of the shipments could come to light.

Singapore is not a big consumer of oil, but it is a major blender of fuel, including some from Iran.

The latest round of U.S. sanctions come into effect on June 28 and aim to cut Iran's oil revenue to pressure Tehran into halting its nuclear program. Western powers suspect Iran is aiming to develop nuclear arms, but Tehran says the program is for civilian purposes only.

Under the law President Barack Obama signed late last year, the administration can exempt countries from sanctions if they make significant reductions to crude imports from Iran. Secretary of State Hillary Clinton granted waivers in March to 10 European Union countries, in addition to Japan.

Another U.S. official, who also asked not to be identified, said earlier on Thursday more exceptions would be announced "soon."

Even if countries are omitted from the list, it does not necessarily follow that the United States would quickly impose sanctions after June 28, the official said.

It would take some time for the U.S. to gather evidence to support punitive measures against financial institutions that have processed oil transactions, said the official.

China, Japan, India and South Korea have already cut their imports by about a fifth from the 1.45 million barrels per day they were buying a year ago as they prepare for the U.S. sanctions to come into effect.

Iran's Asian importers are also struggling to find ways around European Union sanctions that prevent EU insurers from covering shipments of Iranian crude.

Europe dominates the world's tanker insurance market and without its insurers, Iran's crude buyers in Asia may be forced into more drastic import cuts.

Washington has encouraged oil producers, including ally and top exporter Saudi Arabia, to pump more supplies to ensure there is enough crude in the market to cushion the impact of the sanctions.

Plentiful supply and faltering global growth have pushed international Brent crude prices down to around $100 a barrel, from a March peak of $128, making it less costly for buyers to find alternatives.

(Editing by Ed Lane, Anthony Barker, Sofina Mirza-Reid and Jim Marshall)

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