Seoul trying to convince US to extend Iran oil waiver

Special Seoul trying to convince US to extend Iran oil waiver
An employee works at an oil and gas treatment plant in the Yarakta Oil Field, owned by Irkutsk Oil Company (INK), in Irkutsk Region, Russia March 10, 2019. (REUTERS)
Updated 17 April 2019

Seoul trying to convince US to extend Iran oil waiver

Seoul trying to convince US to extend Iran oil waiver
  • Official: Two sides ‘had shared understanding … but US stance has changed recently’

SEOUL: With about two weeks left to the expiry of the US waiver on imports of Iranian crude oil, concerns are growing about whether the six-month exemption will be extended.

South Korean officials have been trying to convince Washington to extend the waiver, but say there has been no clear response.

“Seoul and Washington had shared an understanding of extending the exemption on Iranian oil imports, but the US stance has changed recently,” a senior official at South Korea’s Foreign Ministry said on April 12.

A delegation led by Deputy Foreign Minister Yun Kang-hyeon visited Washington on March 28 and April 8 to consult with Brian Hook, the US State Department’s special representative for Iran, and Francis Fannon, assistant secretary at the State Department’s Bureau of Energy Resources.

Foreign Minister Kang Kyung-hwa and Finance Minister Hong Nam-ki flew to Washington last week to request an extension to the waiver.

“US officials expressed the basic position that they’d further strengthen sanctions against Iran,” the official said.

“We’ll make our best efforts to get the waiver extended, but the situation seems to be not so easy.”

South Korea is among eight countries that were granted a 180-day waiver by the US to sanctions on Iran last November.

In exchange for the exemption, the countries were obliged to reduce imports of Iranian oil significantly.

South Korea in particular is a major buyer of Iranian condensate, a super light form of crude oil used by its large petrochemical industry. Condensate accounts for about 70 percent of South Korean imports of Iranian crude.

Amid growing uncertainty over oil imports from Iran, South Korea has increased shipments from the US.

Imports of US oil were more than seven times higher in March than a year earlier, at 1 million tons from 134,911 tons.

“Despite the increase in oil imports from other nations, Iranian oil still accounts for a large portion of South Korea’s oil imports,” Moon Byung-ki, a senior researcher at the Korea International Trade Association in Seoul, told Arab News.

“In that sense, failing to get the waiver … is expected to affect the local economy, such as rising gas prices and inflation.”

South Korean oil refineries and petrochemical companies would be hardest hit by a potential suspension of purchases of Iranian oil, Moon said.

“Iranian crude is cheaper in price, better in quality and easier for transportation. If imports of Iranian oil are to be blocked by external factors such as the US sanctions regime, the disruption to the local industry would be immediate, without sufficient preparation for the risk,” he added.

In an apparent move to prepare for a potential suspension of oil imports from Iran, South Korea’s top refiners, including SK Energy, have reportedly been testing samples of American super-light oil. A spokesperson for SK Energy declined to comment.

A spokesman for Hanwha Total Petrochemicals Co. downplayed the possibility of using US condensate as a substitute for Iranian product.

“I don’t think it’s feasible to use American condensate for the local refining and petrochemical industry. It’s not a realistic option,” he said.

“The volume of quality naphtha produced from US condensate is much smaller than that from Iranian condensate. We have to buy naphtha from other sources, but it’s difficult to find substitutes.”