Iran Loses $100mn a Day as US Sanctions Hit Exports

Asia's major crude buyers are finding ways around tough US and EU sanctions to maintain imports from Iran, suggesting that, for now, the worst may be over for the OPEC producer that is losing more than $100 million a day in oil export revenues.

China, India, Japan and South Korea buy most of the one million barrels per day of crude Iran is able to export despite financial, shipping and insurance sanctions aimed at curbing funds for its controversial nuclear programme.

But on average, imports are likely to remain steady until the end of the year, unless the United States and the European Union come up with fresh sanctions to curb Iran's earnings.

At current prices, Iran is losing some $110 million a day in export earnings compared with the start of the year.

Japan more than doubled its August loadings to 7 million barrels compared with July to make up for disruptions through the middle of the year, while India is expected to follow suit and load 2 million barrels at most, industry sources say.

China, Iran's biggest oil customer and trading partner, kept August loadings unchanged from July at about 16 million barrels.

Insurance Snags Persist

Even though global markets are awash with crude, Iranian oil has retained its appeal with discounted prices, easier trade financing terms and because its grade of high-sulphur oil is well suited to many refineries.

Earlier this year, the United States granted allies Japan, South Korea and India a waiver from financial sanctions after they reduced purchases from Iran by around 15 percent in the first half of the year from year earlier levels.

China was given a U.S. waiver after imports fell by more than 20 percent during the same period compared to a year earlier due to a dispute over contract terms with Iran.

Imports were hit the most, however, by the EU's ban on providing insurance for Iranian oil shipments. EU insurers underwrite most maritime shipping, and insurers elsewhere have been unable to offer cover for the billions of dollars in claims that could stem from a spill.

The lack of cover prompted South Korea to halt shipments from Iran in July. Its loadings are set to resume in September after Korean refiners decided to follow counterparts in China and India and ask Iran to deliver crude on its own tankers, shifting responsibility to Iran for insurance.

So far, only Japan is providing refiners with government-backed insurance of up to $7.6 billion to ship Iranian oil. India's state-run insurers can provide some limited cover.

Making Iran responsible for insurance is risky in the event of an accident, industry experts say, and using its limited number of oil tankers is not a long-term solution because of new U.S. sanctions that will target the national tanker firm NITC.

The United States is due to review the waivers it granted Iranian oil buyers in the months ahead, and will only renew them if nations show a consistent decline in purchases.