The Asian nation didnt import any crude from Iran last month, compared with 194,000 barrels a day in July, tanker-tracking and shipping data compiled by Bloomberg show. While bigger consumersChinaandIndia have curbed buying from the OPEC producer, South Koreas gone one step further by halting purchases before the U.S. imposes sanctions on the Islamic republic on Nov. 4.
Donald Trumps administration made the demand over Iranian oil after the U.S. president in May withdrew from a 2015 deal that lifted many sanctions on the Middle East nation in exchange for restrictions on the countrys nuclear program. South Korea heeding that call may signal Americas clout over the North Asian nation.
Trapped in a decades-long war in the Korean peninsula, the Souths government has relied on the U.S. to pressure the Norths leader, Kim Jong Un, toabandonits nuclear program. Political ties to America mean it cant ignore Trumps order for allies to adopt a tough policy on Iran, according to the Korea Energy Economics Institute.
Maintaining relations with the U.S. is of the utmost importance to South Korea, Kim Jae-kyung, a research fellow at the institute said. South Koreas national security depends on its military alliance with America, which is prompting it to proactively reduce imports before the governments have completed negotiations.
The South Korean governments officialstanceover Iranian sanctions is that its continuing talks with the U.S. in a bid to seek a waiver. While the Trump administration has softened its stance slightly, going from zero tolerance on purchases to saying it will consider exemptions, they are yet to be granted and buyers still face the risk of being cut off from the American financial system after the November deadline.
We will consider waivers where appropriate, U.S. Secretary of State Michael Pompeo said at a press briefing in New Delhi on Thursday. But it is our expectation that the purchases of Iranian crude oil will go to zero from every country or sanctions will be imposed, he said.
While the relationship between Trump and Kim was fraught in the initial phase of the U.S. presidents rule, diplomatic relations have since warmed, culminating in a historic summit between the two in Singapore in June.
South Korean President Moon Jae-in said Trump deserves great credit for bringing the North to talks. Earlier this month, Kim told visiting South Korean envoyshe was readyto accept stronger measures to restrict his nuclear program and wanted a declaration with the U.S. to formally end the Korean War.
Under Pressure
Its not the first time Trump has leaned on South Korea. He berated the Asian nation for a trade surplus in 2017, and named it in a currency watch list the year before. A South Korean government officialrespondedthat the country will look into whether theres room to increase energy purchases from America, and a few months later the energy minister said itwants to include the U.S. in its import portfolio.
While in New Delhi last week, Pompeo added that he would be happy to see if its American products that are able to fill in the gap of lost supply from Iran. But a switch may not be simple for refiners because the quality of all U.S. output isnt similar to oil from the Persian Gulf state.
South Korea will comply with the U.S. sanctions on Iran for the multitude of reasons -- national security, trade to name a few, said WengInn Chin, a senior oil market analyst at industry consultant FGE in Singapore. Companies will not want to risk any actions by the U.S. for breaching the sanctions. South Korean refiners will have to replace the volumes.
