iranian oil

Very queer!

Why would China (or any other country) want to forego its own strategic interests?

Geithner Presses China to Curb Iran Oil Imports

Wall Street Journal,

11 January, 2012

U.S. Treasury Secretary Timothy Geithner urged top Chinese officials to greatly reduce China's imports of Iranian crude oil, and explained to them details of a new U.S. sanctions policy against countries that don't curtail their purchases.

"We are in the early stages of a broad global diplomatic effort to take advantage of this new legislation to significantly intensify the pressure on Iran," a senior U.S. official said in Beijing. "We are telling them [the Chinese] what's important to us and they are listening."

The senior U.S. official added that "We have a reasonable shot at getting a number of countries to wean themselves off Iranian oil."

It is far from clear whether the Chinese will go along with the sanctions regime. Faced with U.S. initiatives, Chinese officials customarily listen and weigh the alternatives but take months before making their decision clear.

In public, Chinese officials have forcefully opposed unilateral U.S. sanctions on Iran. However, U.S. and other officials tend to discount Chinese public statements and watch what Beijing does.

The U.S. believes that Beijing has taken steps to rein in companies that do business with Iranian firms that could be involved in Iran's nuclear program. But U.S. officials aren't sure whether a recent slowdown in Chinese purchases of Iranian crude represents a political signal from China about its willingness to follow the U.S. lead or is simply the result of a commercial dispute between Chinese and Iranian energy firms.

The U.S. sanctions policy is aimed at sharply reducing Iran's exports to its biggest markets, including big Asian nations such as China, India, Japan and South Korea. A new law would bar from U.S. financial markets foreign financial institutions that do business with Iran's central bank, which plays a critical role in facilitating foreign trade. One way for a nation to get an exemption is to show a "significant reduction" in Iranian oil imports.

The law could have a devastating impact on Chinese banks that to do business in the U.S. and by extension harm the ability of many Chinese companies to export.

On other matters, Mr. Geithner argued in the discussions that China should continue to let its currency appreciate. There has been some speculation Beijing would radically slow or even a halt the yuan's rise to help Chinese exporters as growth slows.

However, the Chinese "talk about continued appreciation," the U.S. senior official said. "They recognize that their growth strategy leaves them too dependent on external demand" and so needs to be altered.

A number of analysts expect China to reduce the rate of yuan appreciation versus the dollar this year to about 2% to 3%, compared with about 5% last year.

In a brief public statement on Wednesday, Mr. Geithner was complimentary of Beijing's policies. "On economic growth, financial stability around the world, on nonproliferation, we have what we view as a very strong relationship with your government and we're looking forward to building on that," Mr. Geithner said before meeting Chinese Vice President Xi Jinping.

Mr. Xi is expected to become China's Communist Party chief later this year and assume the presidency in 2013. Mr. Geithner also met on Wednesday with Premier Wen Jiabao, and Vice Premiers Li Keqiang and Wang Qishan.

Mr. Wen told Mr. Geithner that the global economic situation is "highly complex." He added that "I always believe when it comes to China and the U.S., dialogue works better than confrontation, and cooperation works better than containment."

The U.S. had a broad agenda for Mr. Geithner's visit, including Iranian oil imports, the economic situation in Europe and the continued appreciation of the yuan.

Mr. Geithner left other trade matters—including a new Obama administration plan to create a government panel to focus on trade issues with China—to discussions between White House aide Michael Froman, Treasury Undersecretary Lael Brainard and Chinese officials.

China's agenda included pressing the U.S. to reduce restrictions on high-tech exports and to encourage Chinese investment in the U.S. The U.S. generally tries to turn those conversations into a discussion of how China needs to tighten its protection on intellectual property, so U.S. firms will feel more comfortable sharing cutting-edge technology with Chinese firms.

The U.S. is looking to cripple Iran's oil industry as a way to persuade the nation to scrap a nuclear weapons program. Iran denies it is developing nuclear weapons.

Financial institutions have six months to comply before the U.S. decides whether to impose sanctions—putting the decision in the middle of the U.S. election season. For both the U.S. and Asian nations, the sanctions decision will require perilous political calculations. If President Obama shies away from imposing sanctions, he could be hammered by his political opponents for failing to do enough to curb Iran's nuclear program.

But imposing sanctions on China, the world's second-largest economy and one of the few fast-growing ones, would threaten relations with Beijing, complicating a U.S. shift in its political and economic focus toward Asia.

For China, cutting imports from Iran could open the leadership, in the midst of its own transition, to criticism it is caving in to U.S. pressure. But failing to cut imports could harm relations with the U.S., its most important economic partner.

Chinese Premier Wen Jiabao is scheduled to visit the Middle East soon, which U.S. officials interpret as an effort to diversify China's oil supplies, so it isn't so reliant on Iran. About 11% of China's crude oil imports come from Iran.

Mr. Geithner headed to Tokyo on Wednesday to discuss the Iran issue and other economic matters. He is meeting with Prime Minister Yoshihiko Noda and Finance Minister Jun Azumi on Thursday.

For Japan and South Korea, the incentive to comply with U.S. wishes is much greater because they are U.S. allies and depend on U.S. military power. Even so, officials in both nations are unhappy with the new U.S. push. "We are concerned about an impact on global energy prices," an official at Japan's Ministry of Foreign Affairs said Wednesday. "We are also worried about how a fuel shortage might impact rebuilding" after the massive earthquake and tsunami that hit Japan in March.

Still, Japan's Minister of Foreign Affairs Koichiro Gemba is touring the Middle East this week, asking major oil-producing countries, including Saudi Arabia and the United Arab Emirates, to increase oil production in order to stabilize prices, and urging Iran to back down from its threats to close the strategic Strait of Hormuz in case of an embargo on Iranian crude exports.

Mr. Geithner is delivering a "very tough message," said U.S. energy analyst Philip Verleger, " 'You are with us or you are against us.'"

Saudi Arabia, a rival of Iran's, is likely to pick up exports to make up for any loss of Iranian crude.

One possibility is that some countries will shift to barter deals with Iran, which wouldn't require energy firms to use their home banks or other institutions that deal with Iran's central bank. Iraq depended on barter sales of oil when it was faced international sanctions during the reign of Saddam Hussein. "I believe China is trying to set up some barter deals—and is probably getting a 50% discount," said Mr. Verleger.

Iran would be under great pressure to cut prices to assure it can sell its crude.

One area where China and the U.S. seem to agree is how to handle Europe. Both are dissatisfied with the size of the bailout fund put together by European nations and the time it has taken for the Europeans to get the fund running. China has said it would make contributions to the International Monetary Fund to boost its ability to make emergency loans to Europe and elsewhere, but has said it was waiting for the Europeans to finalize the plans for its own rescue funds.

According to a Western official in Beijing, China also has been waiting for the U.S. to give its go-ahead to the IMF to create a new fund. The U.S. has withheld that approval as a way to put pressure on the Europeans to act.

Japan Wants to Keep Importing Iranian Crude

Wall Street Journal,

10 January, 2011

Japan wants to keep importing crude oil from Iran despite rising pressure from the U.S., its key ally, to cooperate in strengthening sanctions over the Islamic Republic's uranium enrichment program.

"We are concerned about an impact on global energy prices," an official at Japan's Ministry of Foreign Affairs said Wednesday. "We are also worried about how a fuel shortage might impact rebuilding" after the massive earthquake and tsunami that hit Japan in March, added the official, who asked not to be named.

The comments came a day before the planned meeting between U.S. Treasury Secretary Tim Geithner and Japan's Finance Minister Jun Azumi. The two ministers plan to meet Thursday morning, with a possible ban on Iranian crude oil and Japan's currency intervention likely to be on the agenda, which a spokesman at the Ministry of Finance declined to discuss.

For article GO HERE

India Still Getting Oil from Iran

Wall Street Journal,

10 January, 2012

NEW DELHI – India still gets normal crude-oil shipments from Iran, two senior officials at India's oil ministry said, though refiners in the South Asian nation have started looking for alternate arrangements to prevent any supply shortages.

India gets about three-quarters of the crude it requires through imports, and Iran is its second-largest supplier after Saudi Arabia. The refiners have been making payments to Iran for oil supplies through Turkey's Halkbank since July, after India's central bank in December 2010 disbanded a settlement mechanism that the U.S. said could be used by Tehran to finance its alleged nuclear weapons program.

Now, with the U.S. and Europe tightening sanctions to force Tehran into suspending the alleged nuclear program, Turkey may become unwilling to route India's payments, according to media reports.

"We haven't heard any such thing from Turkey," one of the officials told said when asked about the reports. "The payments are continuing and we are getting supplies."

The second official said the refiners, however, have started talks with suppliers like Saudi Arabia due to the risk to supplies from Iran in wake of sanctions from the West.

Both officials didn't want to be named.

U.S. President Barack Obama signed a bill into law late last month, empowering U.S. authorities to impose penalties on foreign banks dealing with the Central Bank of Iran to settle oil payments. The European Union has also agreed in principle to ban imports of Iranian crude oil.

In India, Mangalore Refinery & Petrochemicals Ltd., Indian Oil Corp., Bharat Petroleum Corp., Hindustan Petroleum Corp. and Essar Oil Ltd. (source crude oil from Iran.

Essar, which gets 3.0 million barrels of crude a month from Iran, "is not being impacted by the Iranian situation," a company spokesman said. "At our Vadinar refinery [in the western state of Gujarat], we continue to be able to source the crude we require from Iran."

A Bharat Petroleum executive, who didn't want to be named, said supplies from Iran were normal even though it hasn't been able to pay as Halkbank didn't open its payment account last year. The executive didn't give any reasons for Halkbank's refusal in opening its account.

"Our volumes are small so Iran is continuing supplies despite our inability to pay," the executive said. "We are in discussions with the oil ministry for an alternative payment route."

The other refiners are routing payments via Turkey.