ERBIL, Kurdistan Region – Iran’s Asian oil buyers will be looking for ways to deal with the return of US sanctions.
China, India, Japan, and South Korea are the biggest buyers of Iran’s crude oil. The four Asian states together import around 1.5 million barrels of crude oil per day out of the Iran’s total 2.7 million barrel export – around 55 percent.
On May 9, US President Donald Trump withdrew from the 2015 Iran nuclear deal. New US sanctions will soon be imposed on Tehran, deterring countries from doing business with Iran.
When US sanctions were placed on Iran in 2012, the four Asian countries were given a waiver, requiring them to reduce their business with Iran by 20 percent each six months rather than halt trade immediately.
The Asian oil buyers are less likely to receive a similar waiver from the Trump administration, which is much tougher on Iran. On May 24, US Secretary of State Mike Pompeo said there will be “unprecedented sanctions” on Iran, signaling there will be no waivers.
“I don’t believe they can receive a waiver from the United States,” Iranian Oil Minister Bijan Namdar Zanganeh said on June 22, in a Bloomberg television interview.
Iran may need to resort to a bartering system to continue selling its oil. Under the 2012 US sanctions, India imported $10.5 billion worth of goods, mainly crude oil, and exported commodities worth $2.4 billion.
The barter system will be inefficient, as Iran’s oil sales are greater than the value of what it imports from these countries. It also cannot use the currencies of these countries for international business transactions.
When Iran used the barter system to circumvent the US sanctions, its oil exports fell from 2.5 million barrels to about 1.5 million barrels between 2011 and 2012, according to the US Energy Information Administration.
Multinationals have already begun pulling out of Iran so as not to lose more lucrative markets in the US. These include French oil giant Total, the world’s largest container shipping company Maersk, and multinational airplane producers Airbus and Boeing.
Oil firms Royal Dutch Shell PLC and Total SA have halted already purchases, Zanganeh told Bloomberg.
If the US sanctions on Iran remain in place for an extended period, Iran will be more marginalized in the global oil industry and international financial system. Asian oil buyers may be forced to turn to Saudi Arabia and Russia.