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SEOUL, South Korea – Japan, South Korea and other major oil importers on Tuesday welcomed the decision of the Trump administration to let them continue to import Iranian oil and other oil products, despite the new imposition of sanctions in Tehran.
The risk of excessive disruption of global markets was a key factor in the decision to allow exemptions for some of the largest and most oil-hungry economies. He seemed to have borne fruit.
Tuesday at noon, oil prices had fallen slightly, with the benchmark US crude falling 0.3% and the Brent, used to fix the price of international oil, down nearly 0.4%. The fear was that the sanctions deadline would have pushed up oil prices.
Five of the eight economies with exemptions as long as they strive to reduce Iran's oil imports to zero are in Asia: China, India, Japan, South Korea and Taiwan. The others were Greece, Italy and Turkey.
Sanctions against Iran were lifted as part of the 2015 nuclear deal with the world powers. President Donald Trump rejected the deal and on Monday the US Treasury Department imposed sanctions on more than 700 people, entities, aircraft and ships related to Iran and Iran as part of the new sanctions.
The new sanctions targeted in particular the vital oil industry of Iran, which is an essential source of hard currency.
Japan said it was happy to be temporarily sheltered from possible sanctions for the import of Iranian oil. Cabinet Secretary-General Yoshihide Suga told reporters that Tokyo was analyzing the potential impact and was consulting closely with the United States on protecting Japanese companies from "adverse consequences."
These would include penalties for non-compliance with long-term oil purchase agreements.
Nevertheless, South Korean Trade Minister Kim Hyun-chong said on Tuesday that the waiver had "paved the way" for the oil refining sector in South Korea, which relies on imports of crude oil very light called condensate.
The waiver is also a relief for South Korean companies exporting to Iran: the United States has also agreed to maintain a special transaction system set up in October 2010 following discussions between Washington and Seoul that essentially allow South Korea to take Iranian oil as a means of payment.
With the maintenance of the US transaction system, South Korean companies will continue to export unauthorized items to Iran, officials said.
India has a similar arrangement whereby Iran can use crude oil to pay for its food and other needs.
"These countries are currently taking the lion's share of Iran's oil exports. It is therefore likely that Iranian oil exports will stabilize at their current level of a good million barrels a day, "said Commerzbank analysts.
They said Iran's exports may well recover somewhat as Japan and South Korea had sharply reduced imports in recent months as they sought US exemptions.
For Japan and China, Iran is an important but not huge supplier. Saudi Arabia, the United Arab Emirates, Russia, Qatar and Kuwait export more crude oil to Japan than Iran.
China, which regretted the US's rejection of the deal with Iran, is the largest importer of crude oil, with about 9 million barrels a day, as well as Iranian oil. Therefore, cutting all shipments could have shaken world markets.
Although its demand is huge, China has diversified and relies on Iran for less than 10% of its total crude oil imports. Saudi Arabia, Angola, Russia, Oman and Iraq provide more than half, according to the US Energy Information Administration.
The main European allies opposed the US decision to reject the nuclear deal with Iran. The European Union, composed of 28 countries, would prepare a new financial mechanism to help its companies avoid American sanctions, which could allow Iranian oil exports to continue to circulate.
British Prime Minister Theresa May's office in Downing Street said on Tuesday that the United Kingdom would continue to expand its trade relations despite the decision.
"We regret the re-imposition of sanctions by the United States," said May's spokesman James Slack. "We continue to fully support the development of our trade relations with Iran and encourage UK companies to take advantage of business opportunities that arise."
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Associate press editors Mari Yamaguchi in Tokyo, Danica Kirka in London and Elaine Kurtenbach in Bangkok also contributed.
Copyright 2018 The Associated Press. All rights reserved. This material may not be published, disseminated, rewritten or redistributed.
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