U.S.
Wish for Zero Oil Imports From Iran Granted by South Korea
Economics
U.S.
Wish for Zero Oil Imports From Iran Granted by South Korea
By
Heesu Lee
September 9, 2018, 11:00 PM GMT+2
·
South Korea’s Iranian crude imports plunge
to zero in August
·
South Korea has become the first of Iran’s
top-three oil customers to fulfill a hard-line U.S. demand that buyers cut
imports to zero.
The Asian nation didn’t import any crude
from Iran last month, compared with 194,000 barrels a day in July,
tanker-tracking and shipping data compiled by Bloomberg show. While bigger
consumers China and India have curbed buying from the OPEC
producer, South Korea’s gone one step further by halting purchases before the
U.S. imposes sanctions on the Islamic republic on Nov. 4.
Donald Trump’s administration made the
demand over Iranian oil after the U.S. president in May withdrew from a 2015
deal that lifted many sanctions on the Middle East nation in exchange for
restrictions on the country’s nuclear program. South Korea heeding that call
may signal America’s clout over the North Asian nation.
Trapped in a decades-long war in the
Korean peninsula, the South’s government has relied on the U.S. to pressure the
North’s leader, Kim Jong Un, to abandon its nuclear program.
Political ties to America mean it can’t ignore Trump’s order for allies to
adopt a tough policy on Iran, according to the Korea Energy Economics
Institute.
“Maintaining relations with the U.S. is of
the utmost importance to South Korea,” Kim Jae-kyung, a research fellow at the
institute said. “South Korea’s national security depends on its military alliance
with America, which is prompting it to proactively reduce imports before the
governments have completed negotiations.”
Also read: U.S. November Deadline
Scares Iran Oil Buyers From October Crude
The South Korean government’s
official stance over Iranian sanctions is that it’s continuing talks
with the U.S. in a bid to seek a waiver. While the Trump administration has
softened its stance slightly, going from zero tolerance on purchases to saying
it will consider exemptions, they are yet to be granted and buyers still face
the risk of being cut off from the American financial system after the November
deadline.
“We will consider waivers where
appropriate,” U.S. Secretary of State Michael Pompeo said at a press briefing
in New Delhi on Thursday. But “it is our expectation that the purchases of
Iranian crude oil will go to zero from every country or sanctions will be
imposed,” he said.
While the relationship between Trump and
Kim was fraught in the initial phase of the U.S. president’s rule, diplomatic
relations have since warmed, culminating in a historic summit between the two
in Singapore in June.
South Korean President Moon Jae-in said
Trump deserves “great credit” for bringing the North to talks. Earlier this
month, Kim told visiting South Korean envoys he was readyto accept
“stronger measures” to restrict his nuclear program and wanted a declaration
with the U.S. to formally end the Korean War.
Under
Pressure
It’s not the first time Trump has leaned
on South Korea. He berated the Asian nation for a trade surplus in 2017, and
named it in a currency watch list the year before. A South Korean government
official responded that the country will look into whether there’s
room to increase energy purchases from America, and a few months later the energy
minister said it wants to include the U.S. in its import portfolio.
While in New Delhi last week, Pompeo added
that he would be “happy to see if it’s American products that are able to” fill
in the gap of lost supply from Iran. But a switch may not be simple for
refiners because the quality of all U.S. output isn’t similar to oil from the
Persian Gulf state.
“South Korea will comply with the U.S.
sanctions on Iran for the multitude of reasons -- national security, trade to
name a few,” said WengInn Chin, a senior oil market analyst at industry
consultant FGE in Singapore. “Companies will not want to risk any actions by
the U.S. for breaching the sanctions. South Korean refiners will have to
replace the volumes.”
— With assistance by Nick Wadhams
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