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U.S. Discusses Iran’s Oil Issue With South Korea

Japan oil refinery

A top U.S. official discussed this week South Korea’s crude oil imports from Iran and urged Seoul to accelerate its oil supply diversification, S&P Global Platts reported on Thursday, quoting a diplomatic source.

U.S. Assistant Secretary of State for Energy Resources Francis Fannon is on a tour in Asia this week and is visiting Seoul and Tokyo between February 19 and 26. Assistant Secretary Fannon is meeting with government officials and private sector representatives “to discuss energy security and regional cooperation on energy issues,” the U.S. Department of State said, noting that the official will also highlight the importance of energy diversification in the Indo-Pacific Region.

Both South Korea and Japan were among the eight Iranian customers who received waivers from the U.S. to continue importing Iranian oil at reduced volumes until early May 2019.

South Korea’s Deputy Minister for Economic Affairs of the Ministry of Foreign Affairs, Yun Kang-hyeon, met with Fannon on Wednesday and discussed ways to increase cooperation in the energy sector, South Korea’s Ministry of Foreign Affairs said.

Yun and Fannon “talked about the Iranian crude issue and South Korea’s efforts toward diversification of sources of crude imports,” Platts’ source in Seoul said, without elaborating on details.

Related: EIA Inventory Report Pushes Oil Prices Lower

According to Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National, Fannon’s visit seems to be aimed at urging supply diversification and boosting energy security, including by Japan and South Korea increasing their U.S. crude oil imports, which may lead to reduced Iranian oil imports in the region.  

Iran’s key Asian customers—Japan, South Korea, India, and China—are all buying Iranian crude once again, but at much lower rates than they did before November when U.S. sanctions kicked in, S&P Global Platts estimates showed at the end of January.

The U.S. has signaled that Iranian customers shouldn’t rely on waiver extensions, but the Trump Administration has not yet officially said if it would stop granting waivers. Some observers say that the decision would depend on the price of oil at the time the U.S. needs to decide on exemptions, because, despite the pledge for ‘zero’ Iranian exports, the Administration will not be willing to drive up oil prices too high.

By Tsvetana Paraskova for Oilprice.com

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