The US exempted Japan and 10 EU nations from financial sanctions because they have significantly cut purchases of Iranian crude oil, but left Iran’s top customers China and India exposed to the possibility of such steps.
The decision announced on Tuesday is a victory for the 11 countries, whose banks have been given a six-month reprieve from the threat of being cut off from the US financial system under new sanctions designed to pressure Iran over its nuclear program.
However, the list did not include China and India, Iran’s top two crude oil importers, nor US allies South Korea and Turkey, which are among the top 10 consumers of Iranian oil.
Japanese Finance Minister Jun Azumi welcomed the decision and said Japan would continue to cut its imports of Iranian oil at a set rate in the future.
“The decision takes account of Japan’s steps on Iranian oil, including its future response,” Azumi told reporters at a regular briefing.
A US official held up Japan’s estimated 15 percent to 22 percent cut in oil purchases from Iran in the second half of last year as an example for other nations, saying it did so after the “tragedy” of last year’s earthquake and tsunami that caused the Fukushima Dai-ichi nuclear power plant disaster.
“Japan was a model,” Carlos Pascual, US Department of State special envoy and coordinator for international energy affairs, told lawmakers. “If Japan was able to do what it did ... that should be an example to others that they could potentially do more.”
Pascual declined to set a benchmark for countries to secure an exemption from the US financial sanctions, saying US law only says they must “significantly reduce” oil imports from Iran and must continue to do so to win future exemptions.
South Korea will hold another round of talks soon with the US on significantly reducing its imports from Iran, a source at the South Korean economic ministry said yesterday.
South Korea, the world’s fifth-largest oil importer, increased its imports from Iran last year by 20 percent. Its refiners have also signed deals to import a little more crude from Iran this year.
The 10 nations from the EU, which has already decided to stop importing Iranian oil beginning in July, were Belgium, Britain, the Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland and Spain, the US Department of State said.
“The actions taken by these countries were not easy,” US Secretary of State Hillary Rodham Clinton said in a statement. “We commend these countries for their actions and urge other nations that import oil from Iran to follow their example.”
While China and India and others remain exposed to the possible financial sanctions if they do not significantly cut Iranian imports, US law gives US President Barack Obama the ability to waive such steps if this is in the national interest.
The US has gradually tightened sanctions because of Iran’s failure to answer questions about its nuclear program, which Washington and its allies suspect is a cover to develop nuclear weapons. Tehran says it is solely to generate power.
World oil prices have surged in recent weeks on concerns about tensions with Iran — including the possibility that Israel will launch an attack on Iranian nuclear facilities — and on worries sanctions would reduce supplies to an already tight global market.
Crude prices have risen to more than US$125 a barrel on the supply squeeze, but on Tuesday dropped nearly US$1.50 to US$124.25 in London after Saudi Arabia assured markets that it was ready to increase exports to meet any shortfall from Iran.
Mark Dubowitz, an advocate for tougher sanctions on Iran and the head of the Foundation for Defense of Democracies, said Japan’s example was likely to be significant.
“The key number will be what Japan agreed to,” he said. “This will be the number that other countries will have to meet or otherwise make the case to the administration why their energy circumstances demand a lower reduction.”
Ray Takeyh, an Iran expert at the Council on Foreign Relations think tank, said the exemptions for Japan and the EU were predictable because they had done the most to cut their imports of Iranian crude.
“Japan has taken action in looking for alternative suppliers, while India and China have not demonstrated that they are in compliance with the sanctions,” Takeyh said.
China, Iran’s top trade partner and crude buyer, slashed Iranian crude imports by more than half in the first quarter of this year as China’s largest refiner, Sinopec, put pressure on Iran’s state oil company to give it better terms on crude sales.
Those cuts, if averaged out over the full year, amount to a reduction of about 14 percent of the volume China imported on contract last year. It is as yet unclear if this is a large enough cut for China to avoid pressure from the US to cut more.
All 27 EU nations have agreed to an embargo on Iranian crude purchases by banning new imports on Jan. 23 and phasing out existing contracts by July 1.
A US official, who spoke on condition of anonymity, said exemptions were only granted to 10 of the 27 because the others “did not import Iranian crude in 2011.”
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