The Aftermath of the Intensified Iran Sanctions

According to the Organization of the Petroleum Exporting Countries (OPEC), Iran currently produces 3.5 million barrels per day (bpd) of crude oil and exports around 2.45 million bpd. A major share of Iran’s oil exports has been traditionally bought by countries in Asia, with China, India, Japan and South Korea being Iran’s top customers.

In January 2012, the European Union agreed to an oil embargo on Iran in order to compel the country to halt its nuclear programme, suspected to be intended for developing nuclear weapons. Although Iran has persistently denied the claims and has maintained that its nuclear programme is intended for peaceful purposes, the Unites States and the European Union have been trying to hit Iran’s economy through threats of sanctions on countries that import oil from Iran. As a result, major importers of Iranian crude have reluctantly reduced their dependence on the energy superpower. Besides, the intensified sanctions and the imminent embargo have resulted in increased oil exports from Iran’s Persian Gulf neighbours and Russia.


Iran’s biggest crude buyer till the recent past, China has halved its imports from Iran. China’s year-on-year oil imports from Iran were reduced by 5 percent in January 2012 and 40 percent in February 2012, according to the country’s customs data. Oil imports in March 2012 dropped by 54 percent to 253,302 bpd. On the other hand, China’s imports from Russia, Kuwait and the United Arab Emirates in March 2012 increased by 50 to 70 percent on year-on-year basis.


Japan has significantly reduced its dependence on Iranian oil and is estimated to have cut down its purchases from Iran by 15 to 22 percent in the second half of 2011. According to Japan’s Ministry of Finance, the country’s oil imports from Iran fell 12 percent in January 2012 on year-on year basis. Furthermore, the country is believed to have made steep cuts in its oil purchases from Iran in April 2012. In addition, Japan has promised to reduce its imports of Iranian crude oil to zero in the near future. Japan’s co-operation despite the losses it incurred owing to last year’s earthquake and tsunami has been recognized by the US and it has exempted Japan from its new sanctions. Moreover, the US has been using Japan’s example to persuade other nations to agree to stop importing crude from Iran. On the contrary, recent market reports suggest that in January 2012, Japan’s leading refiner JX Nippon renewed a contract for around 83,000 bpd of crude and condensate from Iran. The company has also arranged to load Iranian oil in April and May and is likely to further purchase more oil in June 2012.


Although India has publicly disapproved the western sanctions saying that the issue of Iran’s nuclear activities should be tackled through diplomacy and dialogue, Indian refiners have started reducing their imports of Iranian crude. Owing to the mixed response given by India to the pressure exerted by the US, India has been kept waiting for a grant of waivers to the US sanctions. However, India’s crude oil imports from Iran have declined by about 34 percent in April 2012 compared to that in March 2012. The total quantity of crude oil imported from Iran by Indian companies during 2010-2011 and 2011-2012 is 18.5 million tonnes and 17.44 million tones, respectively. The latest Indian refiner to have cut Iranian crude imports is Mangalore Refinery and Petrochemical Limited (MRPL), a subsidiary of Oil and Natural Gas Corporation (ONGC). The company has increased its refining capacity from 11.82 million tonnes to 15 million tonnes last month, and it used to procure more than 50 percent of its crude oil from Iran alone. However, in line with India’s commitment to reduce its Iranian crude oil purchases by 11 percent to 15.5 million tonnes in the fiscal year 2012-2013, the company has reduced its imports to 35 percent of its crude oil requirements and has begun procuring crude supplies from Saudi Arabia, Kuwait, Iraq and Russia.

South Korea

South Korea, Iran’s fourth largest crude oil buyer, has also slashed its imports from Iran. According to data released by Korea National Oil Corp., the country reduced its imports from Iran by 22 percent to 195,000 bpd in the first quarter of 2012. Iranian crude oil imports into the country were down by 40 percent in March 2012 on year-on year basis. In addition, industry sources in South Korea have informed the Polymerupdate team that Iranian crude oil imports next month are expected to be reduced by 10 to 20 percent. At the same time, South Korea has increased crude oil purchases from Russia and Iran’s Persian Gulf neighbours.

South Africa

US relations with South Africa are likely to deteriorate in the wake of a recent report by the country’s Revenue Service that crude oil imports from Iran have increased to 505,908 tonnes in March 2012 from 417,188 tonnes in February 2012. However, the country’s refineries have reportedly made cuts in their crude oil imports. Engen Petroleum, the biggest South African buyer of Iranian crude, has stopped oil imports from Iran and has turned to Saudi Aramco owing to the western sanctions. Sasol, another major South African energy and chemicals company, has said that it will resort to an alternative supplier for the 12,000 bpd of crude oil that it used to procure from Iran.


Pakistan’s approach to the US sanctions is determined by its close proximity to Iran and its power deficiency. Pakistan has maintained that it heavily depends on Iran for its crude supplies and will increase its energy ties with Iran. Iran recently offered up to 80,000 bpd of crude oil and a USD 250 million loan to help build a gas pipeline across the border shared by the two countries.

South East Asia

South East Asian countries have predominately bowed down to the increasing US pressure to curb their oil imports from Iran. Singapore’s minimal import of Iranian crude further suffered as the government informed companies in Singapore about the US sanctions and asked them to take appropriate steps to further curb their crude oil dependence on Iran. In 2011, Singapore imported around 20,000 bpd of Iranian crude. Imports of Iranian crude in Philippines dropped to zero in March 2011. The country had imported 5.9 million barrels of Iranian oil in 2011. Indonesia has also tried to convince the U.S. government that the country is not importing Iranian oil and there are no Indonesian oil importers that import oil from Iran. Malaysia’s compliance with the U.S. policies is evident in reports that its state-owned oil company-Petronas-has agreed to halt all imports of Iranian crude from April 2012. Petronas used to purchase 50,000-60,000 bpd of Iranian crude. Thailand, on the other hand, has remained neutral on the oil sanctions because although the country imports only a small volume of crude oil from Iran, it depends heavily on the Strait of Hormuz for crude oil imports from the United Arab Emirates (UAE), Oman, Saudi Arabia, Iraq, Qatar, Kuwait and Yemen.


Turkey is the fifth-largest buyer of Iranian oil. The country’s sole refiner, Tupras, a unit of Koc Holding, has said that it would reduce Iranian crude oil imports by 20 percent in line with Taiwan’s commitment to curb crude imports from Iran by 10 percent.


Known to adhere to resolutions reached by international organizations including the UN and EU, Taiwan has been trying to cut its crude oil imports from Iran as per US requests. Iran was Taiwan’s largest source of crude oil in 2010. Statistics from the Bureau of Energy indicate that crude oil imported from Iran in 2010 amounted to about 21.4 million barrels. CPC Corp., one of the major refiners in Taiwan, has announced that it would halt purchases of Iranian crude from July 2012. The firm buys 7 million to 8 million barrels of Iranian crude every year.

Sri Lanka

Sri Lanka heavily relies on Iran for its crude oil supplies. The country imports 93 percent of its crude oil requirements from Iran. Sri Lanka’s sole refinery, the Sapugaskanda oil refinery, which has a crude oil processing capacity of 50,000 bpd, has been designed to majorly refine Iranian crude. Nevertheless, the country has reluctantly agreed to comply with the US demands, by announcing that it would reduce Iranian crude oil imports in an attempt to secure a waiver from the US sanctions. The country plans to cut imports of Iranian crude oil by three cargoes, each of 135,000 mt by September 2012. The cuts would amount to 3 million barrels that will have to be replaced by supplies from Oman and from Saudi Aramco.


Greece depended on Iran for more than half of its oil imports towards the end of 2011 when the country was engulfed in debt and its GDP saw a fall of 6.9 percent. However, as the financial sanctions on Iran were stepped up, top Greek refiners including Hellenic Petroleum and Motor Oil Hellas suspended purchases of Iranian crude because the sanctions imposed by the US made it impossible for them to make payments. Pleased that Greece has significantly cut its Iranian crude oil purchases, the US has exempted the country from further financial sanctions.

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