SINGAPORE (Reuters) - Japan has made deeper cuts in crude oil purchases from Iran since it secured an exemption from U.S. sanctions in March, putting the country in a strong position to obtain a renewal when the United States reviews the six-month waiver.
Japan was the first of Asia’s top four buyers of Iranian crude to receive a waiver from the United States of tough new sanctions aimed at reducing Iran’s oil income and persuading it to halt a nuclear program the West suspects is meant to build weapons. Tehran denies its nuclear work has a military purpose.
The exemptions were granted to buyers of oil from Iran on condition that they reduced their purchases.
The combination of tight U.S. and European sanctions has forced Iran to cut its oil output and almost halve exports from around 2 million barrels per day last year as Asian customers struggled to pay for the crude and ship it.
Japanese and U.S. officials have already held meetings on the renewal, with Tokyo presenting trade data to demonstrate it is reducing Iranian imports, a Japanese government official said, declining to be identified as he is not authorized to talk to the media.
“We expect to be informed of their decision in coming days,” the official said, referring to a decision by the United States on extending a waiver on Japan. “We are not so much worried about their response about the extension.”
Since it won its first waiver in March, the world’s third-largest oil consumer has cut imports each month by more than a quarter except for an increase of 6.8 percent in June. It completely halted shipments in July.
The United States next granted waivers to South Korea and India on June 11. Their renewals are due in December.
Since Washington issued those exemptions, official data from Seoul has shown imports fell by a quarter in June and by 42 percent in July and may halt completely in August.
European Union sanctions, banning insurance cover for ships carrying Iranian oil, spurred that fall. While South Korea’s shipments are expected to recover in September as Seoul asks Iran to ship the oil, three months of sharp cuts puts the country in a strong position to secure a renewal come December.
“To get an extension on the waiver, we need to show only the import record for six months” (since the waiver was granted), said a South Korean economy ministry source with direct knowledge of the matter. “We reduced the imports more than we had promised to the United States.”
He declined to specify what the level of the officially-agreed reduction was.
Because of the EU embargo affecting shipping, India’s imports also fell, sliding 18 percent in June from a year earlier and 40 percent in July.
India’s case to secure an extension is strong because the overall cuts have been more than was anticipated, an official at the country’s oil ministry said.
China, Iran’s largest oil customer and top trading partner, was the last of the top Asian buyers to secure the waiver on June 28. Official data subsequently released showed China’s imports surged in June to an 11-month high. But they fell in July by 30 percent from a year earlier.
Wider politics, not the oil trade alone, will determine Washington’s review of the waiver for China. Beijing has repeatedly opposed the sanctions, which it views as unilateral moves made outside the framework of the United Nations.
The decision will also depend on whether the United States wants to tighten current sanctions on Iran or not by then.
“It really depends on the U.S. policy by then, if they want to maintain or step up the pressure on Iran,” said a Chinese oil trading official who deals with Iranian oil. “The topic of a waiver has long gone beyond the commercial level.”
In all, Japan, China, South Korea and India - the top four buyers - have cut imports from Iran by a fifth in the first seven months of the year compared to a year earlier. The steepest reduction is by Japan at 39 percent.
The steep cuts in the first half of the year and expectations of an extension have already prompted Japan, South Korea and China to plan take the full volumes of Iranian oil to which they committed under annual term contracts for September.
But imports will average out significantly lower than last year.
Additional reporting by Osamu Tsukimori in Tokyo, Chen Aizhu in Beijing, Florence Tan and Ramya Venugopal in Singapore, Nidhi Verma in New Delhi.; Editing by Anthony Barker