Japanese officials were in Washington Tuesday negotiating how much they would have to cut from their purchases to fulfill the US sanctions law’s requirement for “significant” reductions to warrant getting a waiver from sanctions from the Obama Administration.
A major Japanese newspaper, Yomiuri Shimbun, said the reduction would probably be 11 percent. But American and Japanese officials said no agreement had been reached. That makes it likely that Japan was arguing for an 11 percent cut and would probably have to settle for a few percentage points more.
Indian officials stood up loudly over recent weeks to shout that they would not be cowed by the United States. They said they would not be applying for a waiver and would make their own decisions on Iranian oil buys. As the Iran Times suggested then, it appears that this chest-thumping was mainly for domestic political consumption.
One source told Reuters the Indian government was suggesting cuts of 10 percent to 15 percent in the year from March 2012 to March 2013. But others said no percentage had been finalized.
In the end, Indian firms will decide themselves on whom they buy from. And officials of most importers have not hidden the fact that they are looking for deals elsewhere, in part because they are concerned for a global crackdown on Iran that could stop all exports overnight and leave them hanging. But many also suspect that one reason the Indians are not hiding their global search for oil is that they hope to drive down Iran‘s selling price.
All news reports so far indicate that Iran has refused thus far to offer discounts.
But Indian firms have another problem. All their tankers are insured in Europe, and those EU companies will cease covering tankers that call at Iranian ports as of July 1. About 95 percent of the world’s tankers are covered by European- or American-based insurers. China and Japan have their own insurers, so they aren’t impacted. But no one knows if the insurance firms there will want to take on the extra burden of Indian ships. Reuters quoted maritime lawyers as saying it won’t be easy for Indian firms to get insurance in Japan. This is just further encouragement for Indian importers to look for other suppliers.
China has also brushed aside the US sanctions. But questions have been raised about how dependent China should be on a supplier that is in bad odor with the world. Reuters reported Tuesday that China’s two big importers, who buy almost all the Iranian oil used in China, have now signed new contracts with Iran.
Reuters said Zhuhai Zhenrong would continue to buy the same 240,000 barrels a day as last year. But it said Unipec, the import arm of China’s Sinopec oil company, would buy less than the 260,000 barrels a day it bought last year. Reuters sources on Monday would not tell it how much less Unipec was buying. On Tuesday, it quoted one Chinese source as saying the Unipec reduction would “likely” be between 10 percent and 20 percent.
All the indications were that all three countries would cut their oil purchases from Iran by somewhere in the teen percents. The three countries together bought about 45 percent of Iran’s oil exports last year. A 10 percent cut would mean Iran would have to find new buyers for 9 percent of its crude exports; a 20 percent cut would mean finding new buyers for about 18 percent. To that total needs to be added the 18 percent that the 27 EU countries bought last year and which will be reduced to zero as of July 1.