The United States has granted exemptions from tough, new sanctions on Iran’s oil trade to seven more economies, leaving China the last remaining major importer exposed to possible penalties at the end of the month.
Washington gave waivers to India, South Korea, Turkey and four other countries in return for significantly cutting their purchases of Iranian oil, Secretary of State Hillary Clinton said on Monday.
China, which alone buys as much as a fifth of Iran’s crude exports, and Singapore, where much of the country’s fuel oil is blended, did not receive such waivers, ramping up pressure on two important US trade partners in Asia.
The sanctions, which the United States may impose starting on June 28, are Washington’s most aggressive measures yet to force Iran to reveal its nuclear programme.
The United States and the European Union believe Iran is trying to enrich enough uranium to build a nuclear weapon, while Tehran says the programme is strictly for civilian purposes, primarily to create medical isotopes for use in procedures such as x-rays.
Beyond the 27-country EU, which has banned Iranian imports from July under separate sanctions, other buyers of Iran’s crude have pledged to cut purchases by up to a fifth.
“By reducing Iran’s oil sales, we are sending a decisive message to Iran’s leaders: until they take concrete actions to satisfy the concerns of the international community, they will continue to face increasing isolation and pressure,” Clinton said in a statement.
She is hosting talks with ministers from India and South Korea, Iran’s second- and fourth-largest oil buyers, this week in Washington.
Geng Shuang, a spokesman for the Chinese embassy in Washington, said his government “opposes unilateral sanctions imposed by one country on others”. He added that China will push for a diplomatic solution to the Iran nuclear issue through negotiations.
South Africa, Taiwan, Malaysia and Sri Lanka will also be exempt from the sanctions, Clinton said. Japan and 10 EU countries had been granted exceptions in March.
$10 billion price tag
Banks and other institutions in the economies that received waivers will be given a six-month break from the threat of being cut off from the US financial system under sanctions signed late last year by President Barack Obama.
China, Japan, India and South Korea cut imports by about a fifth from the 1.45 million barrels per day they were buying a year ago as they prepared for the sanctions to come into effect.
The cuts and threat of sanctions have helped drain Iran’s oil revenues by an estimated $10 billion since the start of the year, said Senator Robert Menendez, a Democrat who helped craft the measures.
“While I look forward to seeing the actual levels of reductions made by each country, I presume that they will be on par with the significant reductions in purchases made by Japan,” which cut its buying by about 15 per cent to 22 per cent, he said.
Oil traders had largely expected the exemptions after the cuts, with Obama seeking to tread a fine line between tightening the screws on Tehran and triggering a squeeze on global oil supplies that could tip the US economy back into recession.
“The White House doesn’t want to see 1 million barrels per day of Iranian exports cut when oil prices are still relatively high, but at the same time they want to make sure the sanctions still have some bite,” said Andy Lebow, senior vice-president of energy at Jefferies Bache in New York. “No one thinks they’re going to slap sanctions on China.”
The bigger issue for markets will be whether separate European sanctions blocking access to tanker insurance cause shipments to grind to a halt from July 1.
China ‘over the coals’
It was not immediately clear why the administration did not grant China an exemption. Backers of tough sanctions on Tehran believe China has received clandestine cargoes of oil from Iran, which has disabled tracking devices on some of its shipments.
Senior US officials declined to answer questions about those issues in a conference call with reporters, but said the dialogue with China on the issue was constructive.
Bob McNally, head of the Washington-based oil consultancy Rapidan Group, said Obama may have delayed a decision on China to avoid criticism he is soft on Beijing ahead of the US presidential election on Nov. 6.
“I wouldn’t be surprised to see China raked over the coals a little longer before a decision is taken on whether to grant them a waiver,” he said.
Obama is under pressure from Congress, which may pass even tougher sanctions on Iran.
“If the administration is willing to exempt all of these countries, who will they make an example out of?” said US Representative Ileana Ros-Lehtinen, a Republican and chairman of the House Foreign Affairs Committee.