South Korea has pledged to the United States that it will cut imports of Iranian crude by 15 percent in the next six months to secure its next waiver to U.S. sanctions targeting Iran's nuclear program, two sources told Reuters.
U.S. and European measures aimed at curbing Iran's oil shipments and depriving Tehran of its main source of funds drove crude exports to the lowest in decades in May. The curbs have cost Iran billions of dollars in lost revenue and Washington is now seeking to cut Iran's exports further via tighter sanctions.
Earlier this month, Washington renewed a six-month exemption on sanctions for China, India, South Korea and six other economies in exchange for their agreeing to reduce purchases of oil from Iran. The exemptions will next come up for review in November, and any country failing to achieve a waiver is liable for sanctions that exclude its banks from the U.S. financial system.
South Korea's government has instructed refiners to make the import cuts, the two sources familiar with the plan said, after meetings between U.S. and South Korean officials.
“The refiners have been unofficially told [by the government] to reduce imports in the next six months by 15 percent compared to the previous six months,” said one of the sources.
The second source confirmed the plan. Both declined to be identified because they are not authorized to speak to media.
The cut would leave South Korean refiners importing slightly less than 126,000 barrels per day (bpd) over the six months to November, according to Reuters calculation based on data from state-run Korea National Oil Corp.
Imports from Iran to South Korea for December to May stood at 148,016 bpd, down 20 percent from a year ago.
Officials at South Korea's energy ministry, foreign affairs ministry and the presidential office declined to comment.
South Korean refiners SK Energy and Hyundai Oilbank are the only two in the country to import Iranian crude. Spokesmen at both refiners declined to comment.
Iran's diminishing exports
The cut is being made against the previous six months rather than from a year earlier because South Korea's oil imports between June and November last year were low due to a two-month import halt due to insurance problems, one of the sources said.
For part of last year, a European ban on Iranian oil shipping insurance made it hard for South Korean refiners to find ships to import Iranian oil, resulting in a drop in imports to 115,245 bpd between June and November of 2012.
Iranian oil imports to South Korea resumed from October of 2012 as Iran offered its own ships to transport the oil.
Sanctions are one of Washington's main strategies to choke funding to Iran's nuclear program. Western countries suspect Tehran aims to develop weapons, while Iran says the program is for peaceful purposes.
U.S. lawmakers aim to deal a bigger blow to Iran's diminishing oil exports. While they are still working out the details, analysts say the ultimate goal could be a near total halt.