South Korea Become First Major Asian Customer to Halt Iranian Imports

The EU embargo on Iranian oil is due to take effect on the 1st of July, but just before that date Ramin Mehmanparast, a spokesman for the Iranian Foreign Ministry, has issued a threat saying that if the embargo is allowed to work, it will have a “negative impact” on Tehrans’s negotiations over its nuclear program.

Last week in Moscow Iran met with six world powers to discuss its nuclear program, and yet again no progress was made in resolving the conflict. A “negative impact” would only make things even harder, drag the affair out for longer, and potentially have a larger effect on global oil prices.

Due to pressure from the US and EU on countries that import Iranian crude, the International Energy Agency says Iran is exporting only 1.5 million barrels a day, 40% less than six months ago.

One of the most profound effects of the EU embargo is the loss of insurance coverage for tankers carrying Iranian crude oil. Most tankers in the world are covered by Western protection and indemnity clubs, with the majority of brokers based in London. The loss of this coverage means that few countries are willing to import Iranian crude.

South Korea has just become the first of Iran’s major Asian customers to stop all oil purchases. In a joint statement by the economy, finance, and foreign affairs ministries, they announced it would halt all imports from the 1st of July due to the loss of insurance for tankers.

If more countries follow suit the embargo could have sufficient impact in order to force Iran back to the negotiating table with a bit more willingness to strike a deal. Well that’s that the West are hoping.

By. Charles Kennedy of Oilprice.com