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Oil in Global Economy Series: U.S. decision to not renew Iran SREs to hurt Asian customers most

Last November, when the United States re-imposed sanctions on Iran and its oil imports, it granted six months Significant Reduction Exceptions (SRE), better known as the sanctions waiver to several countries including China and India, which accounts for more than 50 percent of oil imports from Iran, in exchange for a promise to significantly reduce the oil imported from Iran.

Yesterday, the White House formally announced that it plans to no longer renew SREs, which are set to expire in the first week of May. Here is the official statement from the White House announcing an end to sanctions waiver and measures taken by the United States to counter Iran and its oil imports, https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-working-bring-irans-oil-exports-zero/

The decision by the White House is set to hurt the Asian customers the most not just because they are prime buyers of Iranian crude oil but due to the size of Asia’s ‘long’ oil. Asia remains the single biggest prize for any oil producers,

  • According to the latest data available from British Petroleum, Asia has the largest daily oil deficit in the tune of 22 million barrels/day, which is equivalent to the combined total production of Saudi Arabia and Russia.
  • That number is 5 times the total deficit of North America and 20 times more than the deficit in Europe (including Eurasia), still 2.5 times more excluding Russia from Eurasia.

The economy and well as politics in Asia depend a lot on oil price and the unavailability of cheap Iranian crude oil significantly increases the cost.

Who are the big Asian buyers of Iranian crude?

  • China and India are the two biggest buyers of Iranian crude in 2018. Together they accounted for more than 50 percent of Iranian oil exports.
  • Japan is the third biggest buyer of Iranian crude oil accounting for more than 12 percent share. While Japan has been trying for a waiver over its imports, it has announced plans to cut back its imports in the face of sanctions.
  • South Korea is the fourth largest buyer of Iranian crude oil accounting for 7 percent of Iran’s total oil imports but in the face of looming sanctions, South Korea has reduced Iranian imports to zero.
  • Other buyers include Malaysia, Taiwan, and Singapore.
  • Market Data
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