India, China, Turkey Silently Purchasing Iran’s Crude Oil as US Ban Begins

The Trump administration was equally silent about what action it might take if any of the three countries continues to purchase Iranian oil

0
//
iran's crude oil
An oil tanker is pictured off the Iranian port city of Bandar Abbas, which is the main base of the Islamic republic's navy and has a strategic position on the Strait of Hormuzon, April 30, 2019. VOA

This article originated in VOA’s Persian Service. Anjana Pasricha contributed from New Delhi and Hilmi Hacaloglu contributed from Istanbul.

Iran’s biggest likely remaining oil customers, China, Turkey and India, were silent about purchases of Iranian crude Thursday as a total U.S. ban on such trade took effect, leaving their next moves a mystery.

The Trump administration was equally silent about what action it might take if any of the three countries continues to purchase Iranian oil after Thursday, with no statements on the subject issued during the day by the departments of State or Treasury.

A six-month grace period granted by the United States for China, Turkey, India and five other governments to reduce their Iranian oil imports to zero expired Wednesday. In an April 22 statement, U.S. Secretary of State Mike Pompeo said no nation would receive any further exemptions or waivers from U.S. sanctions imposed on Iran’s oil industry last November. The sanctions are part of a U.S. bid to pressure Iran into negotiating a new deal to end its alleged nuclear weapons program and other malign behaviors.

iran's crude oil
Secretary of State Mike Pompeo speaks during a news conference, April 22, 2019, at the Department of State in Washington. VOA

Iran has said its nuclear program is peaceful and it intends to keep exporting oil, its main revenue source, in defiance of the U.S. sanctions.

Washington has been encouraging Iran’s oil customers to switch to other major oil producers such as Gulf Arab nations that have pledged to keep energy markets appropriately supplied. Pompeo also has said the United States will enforce its unilateral ban on Iran’s oil trade and warned that paying Iran for its crude entails “risks” that will “not … be worth the benefits,” a reference to the possibility of purchasers facing U.S. secondary sanctions.

Turkey

Speaking to reporters Thursday, Turkish Foreign Minister Mevlut Cavusoglu said diversifying Ankara’s oil sources in a short time “does not seem possible.”

iran's crude oil
FILE – Turkish Foreign Minister Mevlut Cavusoglu attends a news conference in Ankara, Turkey, April 1, 2019. VOA

Cavusoglu said Turkish refineries that have been processing Iranian crude are capable of handling oil from Iraq but not from many other nations, whom he did not name. He said Turkey would need to upgrade the technology of its refineries in order to import oil from those other countries, requiring the refineries to be shut down for a period of time.

“This would have a cost. However you look at it, the unilateral decision made by the U.S. is adversely affecting everyone,” Cavusoglu said. “The U.S. should review its decisions.”

The top Turkish diplomat did not say whether Ankara will buy Iranian oil in future.

iran's crude oil
Turkish Imports of Iranian Crude Oil. VOA

But Turkey has been significantly reducing its reliance on Iranian imports since the start of the U.S. sanctions waiver. Data from Turkey’s Energy Market Regulatory Authority show the country imported an average of 209,000 tons of Iranian crude per month from November through February, the first four months of the waiver period. It had been importing an average of 701,000 tons per month in the prior 10 months, accounting for around one-fifth of its total oil imports for the period.

China

China, Iran’s biggest oil customer, made no comment on Thursday’s expiry of the six-month U.S. waiver for buying Iranian crude. But its initial response to the U.S. decision not to extend the waiver was similar to that of Turkey. In an April 24 news briefing, Chinese Foreign Minister spokesman Geng Shuang said Beijing also opposes the unilateral sanctions and “long-arm jurisdictions” of the United States. He also urged Washington not to undermine what he called Beijing’s lawful and legitimate “cooperation” with Iran.

iran's crude oil
FILE – Chinese Foreign Ministry spokesman Geng Shuang gestures as he speaks during a daily briefing at the Ministry of Foreign Affairs office in Beijing, Sept. 4, 2017. VOA

India

India also did not comment Thursday. In an April 23 tweet, Indian Oil Minister Dharmendra Pradhan said New Delhi has a plan to maintain an “adequate” supply of crude to Indian refineries, adding: “There will be additional supplies from other major oil-producing countries.”

Pradhan did not name those countries or say whether the additional supplies would completely replace crude from Iran, which had been India’s third biggest supplier a year ago.

Indian media have said Foreign Minister Sushma Swaraj appealed to Pompeo in an April 27 phone call for New Delhi to have more time to import Iranian oil without being hit by U.S. secondary sanctions. Swaraj was quoted as calling for flexibility in the U.S. position because India is in the midst of a general election and wants the next government to make decisions about whom to buy oil from.

iran's crude oil
China, India Imports of Iranian Crude Oil, March 2018 vs 2019. VOA

China and India had been reducing their dependence on Iranian oil before the end of the U.S. waiver period. An April 30 report by Reuters showed both nations significantly cut their Iranian crude imports in the January to March quarter compared to the same period a year before, with China making a 28% reduction and India a 40% reduction in imported barrels per day.

What will the three do?

Frank Verrastro, a Washington-based energy analyst at the Center for Strategic & International Studies, told VOA Persian he expects further reductions in China’s purchases of Iranian oil.

“They have been increasing purchases of similar-quality Saudi oil as well as looking at alternative supplies from the U.S., other Mideast nations and Russia,” Verrastro said in a Tuesday email.

But Verrastro said Beijing also may try to keep importing some Iranian crude in ways that bypass the U.S. financial system and sanctions regime. He said China could barter with Iran, enable Iran to repay loans with oil, or make non-U.S. dollar purchases of Iranian crude.

iran's crude oil
​China, India Imports of Iranian Crude Oil, Year-to-Date. VOA

Indian strategic affairs analyst Manoj Joshi of New Delhi’s Observer Research Foundation told VOA the U.S. ban on Iranian oil exports presents India not just with an economic challenge but also a foreign policy one. “It puts us in a very awkward spot,” Joshi said in a Thursday interview, noting the move will hurt India’s ties with Iran. “The U.S. may be our partner, but we cannot have a congruence of interests in everything. When there are no options, what do you do?”

ALSO READ: Iran will Continue with Low-Level Uranium Enrichment Despite US Move to Stop it

Turkey is likely to wait and see what Iran’s bigger customers China and India do before deciding whether to keep importing Iranian oil, according to Hakki Uygur, acting director of Ankara’s Center of Iranian Studies. In a Wednesday interview with VOA Turkish, he said that if China and India maintain their recent levels of imports, Turkey may do the same.

“But if the U.S. sanctions are enforced strictly, Iraq would be one of our most important secondary sources of oil,” Uygur said. (VOA)