SEOUL South Korea is set to resume Iranian oil imports in October after crude cargoes were halted by EU sanctions in the previous two months, with shipments transported under Iranian insurance cover to avoid sanctions targeting Tehran's nuclear program.
The north Asian country's overall crude oil imports fell 2.8 percent in September from a year ago to 78.36 million barrels, or 2.6 million barrels per day (bpd), data from the state-run Korea National Oil Corp showed on Monday.
The world's fifth largest importer of crude oil, and one of Iran's biggest oil customers, imported 38.77 million barrels of crude oil from Iran in the first nine months of this year, down 41.3 percent year on year, KNOC said.
South Korean refiners have resumed imports of Iranian crude oil for October arrivals, with imports seen at about 6 million barrels per month, or 200,000 bpd, representing a return to full contracted volumes.
The West has applied sanctions on Iran because it suspects Tehran wants to develop nuclear weapons, while Iran says its nuclear program is for civilian purposes.
Iran's exports have fallen sharply in the wake of the sanctions as consumers struggle both to pay for the oil and to secure insurance cover for tankers to ship the crude.
The head of the International Energy Agency (IEA) said on Monday that Iranian oil supply could fall more if sanctions continued, but other sources were filling the gap.
South Korea's crude oil imports from Iran this year are still expected to drop by just over a third from last year due to the two-month gap, said a government source who declined to be named as he was not authorized to speak to the media.
"The cut in our Iranian crude oil imports this year is expected to be much larger than the 20-percent level targeted to ensure we received a U.S. sanction waiver earlier this year," the source said, referring to an exemption given by Washington to some Iranian oil importers on condition that they reduced purchases.
"That will make talks with the United States to extend the waiver in December more difficult," the source said, adding that South Korean refiners would have cut term deals with Iran from this year's level.
South Korea stopped importing Iranian crude from July 1 due to the EU ban, which is part of a raft of Western sanctions aimed at cutting Iran's oil revenues and squeezing funding to its disputed nuclear program.
Seoul, however, brought in an unexpected 137,400 bpd of crude from Iran in July because of shipment delays to June cargoes, KNOC data released in August showed. <O/KOREA1>
In a bid to keep crude flowing to its top Asian customers, Iran offered to provide up to $1 billion of insurance cover to Iranian vessels shipping its oil to South Korea, which allowed Seoul to resume imports, while a shortage of tankers in Tehran led to some delay in oil shipments to China.
Out of South Korea's four refiners, only SK Energy and Hyundai Oilbank import Iranian crude.
SK Energy's term contracts with Iran this year are for imports of two Very Large Crude Carriers (VLCCs) of crude per month, or 4 million barrels, and Hyundai Oilbank imports one VLCC per month, or 2 million barrels, sources say.
(Additional reporting by Eunhye Shin and Florence Tan in Singapore; Editing by Clarence Fernandez and Ed Davies)