SEOUL/NEW DELHI (Reuters) - Asia’s top buyers of Iranian crude are likely to secure U.S. approval to continue imports from the Islamic Republic without incurring sanctions, after cutting volumes sharply in the second half of the year, according to government and trade sources.
Government officials in India and South Korea said they expect waivers from U.S. sanctions on Iran, secured in the middle of the year, to be rolled over for another six months. In China, the top buyer of Iranian crude and the Islamic Republic’s largest trade partner, traders said the main state-run oil importers expect a further exemption.
The United States is due to decide early in December whether to extend the waivers, which it granted on condition that countries cut their crude imports from Iran. A renewal means banks in the three countries get another reprieve from the threat of being cut off from the U.S. financial system.
The sanctions aim to choke Iran’s oil trade, the main source of the country’s hard currency, and to force the government to curb its nuclear programme. The West says Iran is using the programme to develop nuclear weapons, which Tehran denies.
Tough U.S. and European sanctions have more than halved OPEC member Iran’s oil exports, and most of what is left flows to Asia. Exports fell to 1.3 million barrels per day in October and around 1 million bpd in the two previous months.
“We are expecting a very positive result as our imports in the second half of this year were very low,” a South Korean economy ministry source who has direct knowledge of the matter told Reuters by phone.
“The announcement will be made around December 7 on the U.S. state department website as the starting date of the new extension is December 8. We already have completed talks with the United States,” the source said.
South Korea’s imports from Iran during the first 10 months of the year stood at 44.55 million barrels, down 40 percent on the year, according to state-run Korea National Oil Corp (KNOC).
“We will definitely get the waiver renewed. We have substantially cut imports from Iran in the six months, so I don’t see any problem,” said an Indian government source privy to the country’s talks with the United States.
From April, the starting month for annual term contracts, India’s imports from Tehran are down 19 percent to about 257,000 bpd to end-September, tanker discharge data shows.
A State Department spokesman said that decisions on extending the exemptions would not be made until early December.
South Korea and India got their initial waivers on June 11, followed by China on June 28. All are due for renewal in December. Japan, the other big Asian buyer of Iranian oil, had its waiver renewed in September.
In China, traders familiar with the government’s thinking said there was an expectation its exemption would be extended because of the extent of cuts in imports. The average monthly decline in Iranian crude imports from a year earlier was more than 20 percent between July and October, according to customs data.
EU sanctions on insurance have led to a dearth of vessels to ship the oil, forcing China, South Korea and India to rely on Iran’s shipping fleet. The fleet is too small to keep up with demand, so many buyers have had to cut imports whether they wanted to or not.
China, the world’s second-largest oil consumer, has repeatedly voiced its opposition to unilateral sanctions such as those imposed by the United States. It says any measures should be multilateral and agreed under the purview of the United Nations.
Still, China’s imports have fallen in recent months as Iranian tankers struggled to ship even the reduced volumes requested by importing countries. Earlier this year, China slashed imports by as much as half as the country wrangled over annual contract terms with Tehran.
China, Iran’s top oil customer and biggest trade partner, has cut imports 22.2 percent in the January-October period to 424,000 bpd compared with a year earlier, customs data shows.
Once the waivers are secured, the focus will be on what countries need to do to secure another 180 day extension of the waivers.
Asian refiners are reluctant to slash purchases beyond the roughly 20 percent cut made this year as many of them operate plants configured to process Iranian crude. Extending the switch to different grades will be a technical challenge for some and incurs costs.
Additional reporting by Aizhu Chen in BEIJING and Luke Pachymuthu in SINGAPORE; Writing by Manash Goswami; Editing by Simon Webb, Aaron Sheldrick and Michael Urquhart