* Imports to recover as S. Korea, Japan to step up purchases
* May rise back to levels before European Union ban kicked
* Shipments recover as Asian buyers work around EU embargo
By Meeyoung Cho and Nidhi Verma
SINGAPORE, Aug 21 Asia's crude imports from Iran
are set to recover in September to levels reached before a July
1 insurance ban by the European Union plunged trade with the
Islamic Republic into uncertainty not seen in decades.
Top Asian buyers -- China, India, Japan and South Korea
together take more than half of Iran's crude oil exports -- have
worked around the European Union embargo, suggesting imports
will stay at least around these levels for the rest of the year.
Refiners want to continue using the Iranian crude many of
their plants are configured to process, as changes will need
lengthy testing of new grades or cause an alteration in output.
"Iran was part of the staple diet," said Sushant Gupta of
energy consultancy firm Wood Mackenzie.
"The refiners would want to keep their crude slate intact if
they can as long as the economics works. We do see a recovery in
Iranian crude imports into Asia in the fourth quarter."
The United States, the European Union, and other Western
nations want to stop Iran's suspected pursuit of nuclear weapons
using toughened sanctions on oil exports, a major source of
income. Tehran says its nuclear program is peaceful.
The European Union insurance ban threw the decades-old oil
shipping and trading system into disarray. EU insurers
underwrite most maritime shipping, and insurers elsewhere have
been unable to offer cover for the billions of dollars in claims
that could stem from a spill.
The European Union ban halved Iran's exports to top Asian
buyers in July from June's figure of 1.28 million barrels per
day (bpd), sending buyers scrambling to work around the measure.
SOUTH KOREA, JAPAN
The recovery in September will be driven by Japan and South
Korea, Iran's third- and fourth-biggest oil buyers respectively.
After a two-month gap, South Korea will resume imports of up to
200,000 bpd from September.
Japan is also resuming imports after completely halting
shipments in July. It is loading about 226,000 bpd in August,
more than double the amount loaded in July. Oil usually takes
around three weeks to journey from Iran to Japan, so these
cargoes will be accounted as imports in August or September.
If Japan lifts around the same volume in September as it
plans for August, the two will help Iranian shipments to Asia's
top buyers rise close to 1 million bpd from 656,300 bpd in July,
when only India and China imported from the Islamic Republic.
In all, Iran's crude exports dropped to about 1.1 million
bpd in June and July from more than 2 million bpd at the start
of the year, sources said. At current prices, that cut meant the
loss of about $100 million a day in earnings for Iran.
Besides Japan and South Korea, Mangalore Refinery &
Petrochemicals Ltd., India's biggest state-owned buyer
of Iranian oil, expects shipments to recover from October after
it completes a facility that allows the use of bigger vessels.
The company's loading plan for September is still not known, but
it plans to lift about 2 million barrels in August.
Indian Oil Corp., the country's biggest oil
refiner, also aims to lift a cargo in September. It had last
imported Iranian oil in May.
Taiwan, a smaller buyer with just 22,000 bpd, also aims to
resume buying from Tehran in September after a gap of six
LOWER THAN LAST YEAR
Still, the recovery will not return Iran's exports to last
year's levels, as buyers have to ensure they have cut shipments
sufficiently to stay eligible for a waiver from the sanctions
imposed by the United States. Washington has given waivers to
the top four Asian buyers that come up for renewal later this
Even after the resumption, Japan's purchases will be about
25 percent lower than a year ago, while those by South Korea
will about 20 percent less. Though India's MRPL is able to raise
imports because of its new facility, it plans to cut shipments
by 20 percent this year.
China, Iran's top oil customer and trading partner, has
nominated full contract volumes of Iranian crude for loading
this month, at just over 16 million barrels. It may stick to a
similar lifting plan for September as its imports in the first
seven months were down 22 percent from a year ago.
"Imports will not rise back to the pre-crisis levels," said
Gupta at Wood Mackenzie. "But we expect to see a recovery,
unless there are some fresh sanctions announced."
South Korea joined its Chinese counterparts by asking Iran
to deliver crude on Iranian tankers, government and industry
sources said. This shifts to Tehran the responsibility for
insurance, sidestepping the EU ban.
Indian refiners have adopted a twin plan to deal with the
insurance issue. They are seeking government approval to ask
Tehran to deliver the oil, and are trying to use limited cover
from state-run insurers for locally-owned tankers to ship it.
Iran has a major interest in keeping its crude flowing to
South Korea, China, India and Japan because they are its top
four customers, taking more than half of its oil exports.
Japanese refiners have secured government-backed insurance
cover for locally owned tankers to ship Iranian crude.
(Additional reporting by Osamu Tsukimori in Tokyo, Chen Aizhu
and Judy Hua in Beijing, Florence Tan, Lee Yen Nee and Elizabeth
Law; Writing by Manash Goswami; Editing by Clarence Fernandez)