China, Singapore Exempted From US Iran Oil Sanctions - Bloomberg

By Indira A.R. Lakshmanan and Terry Atlas - 2012-06-29T01:53:08Z

The U.S. said China and Singapore have “significantly reduced” their purchases of Iranian oil, earning exemptions from U.S. financial sanctions that otherwise would have been imposed yesterday.

China was the biggest importer of Iranian crude last year, and Singapore is Asia’s oil trading and refining hub. The U.S. granted renewable, 180-day exemptions on March 20 to Japan and 10 European Union nations. India, South Korea, Turkey, South Africa, Malaysia, Sri Lanka and Taiwan won exemptions June 11.

“A total of 20 world economies have now qualified for such an exception,” Secretary of State Hillary Clinton said yesterday in an e-mailed statement. “Their cumulative actions are a clear demonstration to Iran’s government that Iran’s continued violation of its international nuclear obligations carries an enormous economic cost.”

China made substantial reductions in imports in the past six months because of a pricing dispute with Iran early in the year. It has pledged future cuts, according to a U.S. official who spoke on condition of anonymity before the announcement.

In Singapore’s case, an increase in purchases early in the year affected the numbers, even though the nation has pledged steps to curtail future imports, according to U.S. officials who asked not to be identified.

Oil Prices

Crude for August delivery declined $2.52 to $77.69 a barrel on the New York Mercantile Exchange, the lowest settlement since October. Futures have fallen 25 percent this quarter, heading for the biggest drop since the final three months of 2008.

Iran is the No. 2 producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, and earns more than half of its government revenue from oil sales, according to the International Monetary Fund. The U.S. sanctions are part of international efforts to pressure Iran to give up elements of its nuclear program that could support producing nuclear weapons. Iran says the program is for peaceful energy and medical purposes.

An EU ban on Iranian oil imports goes into effect July 1. The EU collectively was the second-largest buyer of Iranian oil in the first half of 2011. As a nation, Japan ranked second behind China, according to the U.S. Energy Department.

Clinton said reduced oil exports are costing Iran almost $8 billion a quarter in lost revenue. That estimate is based on a drop in crude exports to 1.5 million barrels a day from 2.5 million a day in 2011 as reported by the International Energy Agency in Paris, she said.

U.S. Law

Under the U.S. law enacted Dec. 31, financial institutions in nations that don’t win exemptions may be cut off from the U.S. financial system if they settle oil trades with Iran’s central bank.

“Secretary Clinton has assured me that at this time China has met the significant reduction standard required by the law and recent precedent to qualify for an exemption from sanctions,” said Democratic Senator Robert Menendez of New Jersey, who sponsored the legislation with Republican Senator Mark Kirk of Illinois.

“The Chinese, however, will have to be mindful that the law requires a significant reduction every 180 days to continue qualifying for an exemption and that we will expect to see additional significant reductions by China and other nations,” he said.

Further Reductions

Mark Dubowitz, executive director of the Foundation for Defense of Democracies in Washington, said the U.S. should seek further cutbacks.

“Going forward, the administration should require major reductions in the next round from China and other countries of 30 to 40 percent, which is more than double what was required this go-around,” he said in an e-mail. “Oil markets are much more liquid and can manage a more aggressive reduction in Iranian oil sales as long as the Saudis maintain current production.”

Mark Wallace, chief executive officer of United Against Nuclear Iran, a New York-based advocacy group, said in an e-mail that the world oil supply presents a “unique opportunity” for nations to stop all Iranian oil purchases.

“We call for the total boycott of Iranian oil to isolate that regime,” he said.

Republican Representative Ileana Ros-Lehtinen of Florida, who heads the House Foreign Affairs Committee, said in an e- mailed statement that the administration granted a “free pass” to China, which she called “Iran’s biggest enabler.”

“If the administration is willing to give China, a country that has aided the Iranian regime’s efforts to acquire nuclear capabilities, a free pass, who is it willing to sanction?” she said.

To contact the reporters on this story: Indira A.R. Lakshmanan in St. Petersburg, Russia, at

ilakshmanan@bloomberg.net; Terry Atlas in Washington at tatlas@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net