The knowns and unknowns of US-Iran oil sanction waivers

Fearing a price spike, Washington granted sanctions waivers to 8 nations

SINGAPORE/LONDON/SEOUL: The United States on Monday re-imposed sanctions against Iran's oil exports to punish Tehran for its involvement in several Middle Eastern conflicts.

Washington had been pushing governments to cut imports of Iranian oil to zero. But, fearing a price spike, it granted Iran's biggest buyers - China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey - sanctions waivers.

That will allow the eight, which account for about 75% of all Iran's oil exports, according to trade data, to import at least some oil for another 180 days. Washington and the recipients of the waivers have not disclosed how much oil they are allowed to import, or under what conditions deals can still be made.

Bernstein Energy expects "Iranian exports will average 1.4-1.5 million barrels per day (bpd)" during the exemption period," down from a peak of almost 3 million bpd in mid-2018.



JP Morgan said "the lack or difficulty in acquiring shipping insurance will help in reducing exports quickly as they did during last international sanctions."

The US bank also said "payments for the oil by the exempt countries must go into escrow accounts in their local currency" and that this "means the money won't directly go to Iran and it can only be used to buy certain non-sanctioned goods from its crude export customers."

Once the waivers expire after 180 days, new waivers are expected to be issued, with a source in China saying his country would likely receive another six months of exemptions, though at a lower rate of around 220,000 bpd.

China

China, the world's biggest importer of crude oil, is also the top buyer of Iranian oil, and its mostly state-owned refiners have lobbied hard for waivers.

Several Chinese sources with knowledge of the matter said China would be allowed to buy 360,000 bpd of Iranian crude during the exemption period of 180 days. That would be about half the daily average China has been importing from Iran since January 2016, trade data showed.

However, one source said the United States had attached strings to the waivers, including counterparty disclosures and laying open settlement methods, which were being evaluated before placing new orders with Iran.



India

India is the world's third-biggest oil importer. India is also Iran's second-biggest oil customer and will be one of the most exposed to a forced drop in supply because of its relative proximity to Iran.

One Indian source close to the country's refining sector said India would likely be allowed to import around 300,000 bpd of Iranian crude during the exemption period compared with normal volumes of around 450,000 to 550,000 bpd.

South Korea

South Korea is a large buyer of Iranian condensate, a super light form of crude oil, used by its large petrochemical industry.

A close US ally, South Korea had stopped buying crude from Iran ahead of the sanctions while still lobbying for exemptions. This week, reports emerged that South Korea received a waiver allowing it to import around 4 million barrels a month, equal to about 130,000 bpd, of Iranian crude and condensate.