By Indira A.R. Lakshmanan - Mar 21, 2012 4:11 AM GMT+0700
The Obama administration won’t impose sanctions on Japan and 10 European Union nations that have “significantly” cut back their imports of Iranian oil this year, Secretary of State Hillary Clinton said.
The U.S. didn’t grant exemptions today to China (CCCIIQIR), the top importer of Iranian crude in the first half of last year, or to India and South Korea, the No. 3 and No. 4 buyers, according to the U.S. Department of Energy.
March 21 (Bloomberg) -- Robert Kaplan, chief geopolitical analyst at Stratfor Global Intelligence and previously an adviser to former U.S. Secretary of Defense Robert Gates, talks about tension between Western nations and Iran over the Middle Eastern nation's nuclear ambitions. Kaplan also discusses the outlook for the North Korean regime. He speaks with Susan Li from the Credit Suisse Asian Investment Conference in Hong Kong on Bloomberg Television's "First Up." (Source: Bloomberg)
Under a U.S. law enacted Dec. 31, countries have until June 28 to demonstrate that they have “significantly reduced” the volume of their Iranian crude purchases or their banks and other institutions financing oil trade with Iran may be cut off from the U.S. financial system. The European countries exempted are Belgium, the Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland, Spain, and the United Kingdom -- the only EU nations that purchased Iranian oil in the past year.
The 10 EU nations and Japan have taken actions that “were not easy,” Clinton said in a statement today. “They had to rethink their energy needs at a critical time for the world economy and quickly begin to find alternatives to Iranian oil, which many had been reliant on for their energy needs.”
Today’s decision means Japan, which was the No. 2 importer of Iranian oil after China in the first half of last year, according to the U.S. Department of Energy, may continue buying some Iranian oil after U.S. sanctions take effect on June 28, without exposing Japanese banks to penalties.
Pressuring Iran
Under the sanctions law, the president must cut off the U.S. bank accounts of any foreign financial institution that transacts petroleum-related business with Iran’s central bank -- unless its country receives an exemption for reducing Iranian oil imports.
The sanctions are part of a coordinated campaign by the U.S. and the EU to ratchet up economic pressure on Iran to abandon any illicit aspects of its nuclear program. Iran is the No. 2 producer in the Organization of Petroleum Exporting Countries, and earns more than half of its government revenue from oil sales, according to the International Monetary Fund.
The European Union decided two months ago to bar Iranian oil imports effective July 1.
A U.S. official who spoke on condition of anonymity because he wasn’t authorized to be quoted said the administration announced today’s exemptions to signal that the EU and Japan are being rewarded for their efforts in the hope that other countries will follow suit before the June 28 deadline.
Japan managed to cut its imports of Iranian oil by 15 percent to 22 percent in the second half of last year, according to public data, during a difficult time when it was reeling from an earthquake and subsequent nuclear disaster, and its energy needs were high, the official said.
‘Sanctions Are Working’
Senator Bob Menendez, a New Jersey Democrat and co-author of the sanctions law enacted Dec. 31, said he supports the decision and applauds “the actions of our friends and allies in the EU and Japan for their forthright and expedient action” in reducing purchases of Iranian oil.
“The sanctions are working,” Menendez said in an interview. “Since President Obama signed the National Defense Authorization Act on December 31, we have seen Iran’s currency plummet and oil shipments in February fell to a 10-year low.”
Mark Dubowitz, executive director of the Foundation for Defense of Democracies in Washington, said in an interview the action “begins to reduce some of the uncertainty in oil markets over how the administration will apply oil market sanctions.”
“It gives Japan, in particular, which needs to keep buying Iranian oil, a clear pathway to continue those purchases without putting their financial institutions at risk,” said Dubowitz, who has advised the administration and Congress on sanctions. “It also establishes an early precedent that puts pressure on South Korea, India, China, Turkey, South Africa and other major buyers of Iranian oil to also comply with US law.”
To contact the reporter on this story: Indira A.R. Lakshmanan in Washington at ilakshmanan@bloomberg.net
To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net
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