Dec 16 (Reuters) - Plans for fresh U.S. sanctions to isolate Tehran have sent shudders among Asian governments who fear they will have no way to pay for Iranian crude imports and face rising costs to fuel the region’s growing economies.
The U.S. Congress on Thursday approved a defense bill that imposes sanctions on Iran’s central bank, sending it to President Barack Obama for his expected signature into law.
At stake is around 1.4 million barrels of oil Iran ships to Asia every day, meeting 10 percent of demand from top buyers China and India. South Korea, Japan and India are scrambling to find ways to keep the oil flowing.
Any restriction on oil supplies from Iran, the world’s fifth-largest crude exporter, could drive up already high oil prices and threaten economies already facing the impact of the euro zone debt crisis.
There is no ban against buying Iranian crude, but sanctions have made financing trade with Iran tough.
Here are details of methods adopted by the top buyers to pay Iran for oil:
China’s two major Iranian oil buyers Sinopec Corp and Zhuhai Zhenrong Corp pay mostly in euros for the roughly 520,000 bpd of supplies they receive, with an annual bill of about $20 billion.
Part of these payments were made into an account Iran’s central bank holds with a Chinese state bank. Companies have said there are no debt issues between Chinese buyers and NIOC. Both sides have told Reuters that payment in yuan has always been on the table, but that has yet to start.
Chinese companies first started paying in euros for their Iranian crude in 2006. The idea of settling some of the oil trade in the Chinese currency was floated early last year.
Iran is China’s third-largest crude supplier, shipping around 540,000 bpd in the first six months of the year, or more than 10 percent of Beijing’s 5.1 million bpd of imports. The flow grew 50 percent from the first half of 2010.
State oil trader Zhuhai Zhenrong Corp, which buys just under half of China’s crude imports from Iran, was among the first of Tehran’s international customers to shift to the euro from the U.S. dollar in 2006, when Iran’s central bank said it wanted to cut back its U.S. dollar holdings.
Three Japanese banks transfer payments in yen directly to Iran’s central bank. The units used in the transactions are U.S. dollars, but the banks pay in yen the dollar equivalent on behalf of the Japanese oil refiners and some trading houses.
Japan last year imported 355,000 barrels per day — or about 10 percent of its crude needs — from Iran, OPEC’s second largest producer. Japan is in talks with U.S. diplomats about a possible waiver to U.S. legislation that would make it more difficult to pay Iran.
In South Korea, Iran holds accounts at state-owned Woori Bank and Industrial Bank of Korea (IBK) for oil payments.
Last year, the Korean government allowed Iran’s central bank to open accounts denominated in Korean won for oil payments after blacklisting the Seoul branch of Bank Mellat and 101 other Iranian companies under international sanctions.
Even with those accounts, Iran has been unable to repatriate the petrodollars or spend it in South Korea. The accounts at IBK and Woori Bank are estimated to hold up to $5 billion of oil money. Iran can use the accounts to buy goods from South Korea but runs a trade surplus of hundreds of millions of dollars every month with Seoul.
India is exploring the option of paying for Iranian oil imports through Russian banks.
In the latest example of Asian buyers struggling to do business with the Islamic Republic, India’s state-run BPCL is unable to pay for crude it is buying from Iran.
India is Iran’s second-largest crude buyer, taking about 341,000 barrels per day (bpd), or about 13 percent of Iran’s 2.6 million bpd of exports in trade worth about $12 billion a year.
BPCL applied for an account with Turkey’s state-controlled Halkbank, which would allow it to use the same payment channel as other Indian refiners, but the bank turned BPCL down, the sources said.
Indian state-run refiners began using Halkbank in July after India’s central bank scrapped a payment clearing method.
The Reserve Bank of India in late December 2010 scrapped a clearing house system which allowed it to settle payments made for imports from Iran through the Asian Clearing Union. The move came after a visit from U.S. President Barack Obama to the south Asian country in November. (Compiled by Asia energy desk)