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US Grants China Exemption on Iran Sanctions

The United States has decided not to penalize China and Singapore for continued purchases of Iranian oil, citing 'significant reductions.'
By Gabe Kahn
First Publish: 6/29/2012, 2:04 PM

Oil Tanker in Suez Canal
Oil Tanker in Suez Canal
Reuters

The Obama administration on Thursday granted a last-minute exemption from its Iran-related sanctions to China and Singapore. China is the world's biggest purchaser of Iranian crude oil, while Singapore is a vital international trading hub for oil.

The US State Department said in a statement that the exemption was granted because both China and Singapore had “significantly reduced” their crude oil purchases from Iran. The exemption must be renewed every 180 days.

Beijing publicly insists that it does not support the US sanctions on Iran and has defended its crude purchases from Tehran as “absolutely reasonable and legitimate.” Iran provides almost 9 per cent of China’s crude imports.

China’s crude imports from Iran rose 35 per cent in May from a month earlier, returning to levels – 522,000 barrels per day – on a par with last year.

Earlier this year, a pricing dispute caused imports to drop dramatically, and China’s total crude imports from Iran over the first five months of this year were down 25 percent from the previous year because of the dispute.

The US measures, which came into force on Friday, allow the imposition of sanctions on financial institutions doing business with the Iranian central bank to facilitate oil trades if a country has not “significantly reduced” purchases of Iranian oil.

Tightening global sanctions have sharply reduced Iran’s crude exports, and some traders and analysts estimate that monthly exports could be almost halved in July from the previous year.

Earlier in June, the US granted exemptions to more than a dozen countries including allies Japan, India, Turkey and European countries, but reportedly hesitated over whether or not to give a waiver to China. Asian purchasers have accounted for more than 60 per cent of Iran’s oil exports.

Meanwhile, the US Congress is working on tougher sanctions targeting Iranian oil sales – a lifeline for the Iranian economy – after talks last week in Moscow over Iran’s nuclear program failed to make progress. The European Union is also mulling more stringent sanctions on Iran.

Meanwhile, Iran's chief nuclear negotiator Saeed Jalili sent a letter to European Union foreign policy chief Catherine Ashton, which warned the powers against imposing further sanctions against his country.

According to Jalili, sanctions are "not helpful" as they only hurt what he termed a "positive trend" in negotiations between Tehran and the major world powers.  "Continued successful talks will only be possible in a spirit of cooperation," he wrote.