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Will Asian importers turn their backs on Iranian oil?
Published: 24 February, 2012, 20:48
Flames come out of chimneys at a Repsol oil refinery in Cartagena eastern Spain. ( REUTERS/Francisco Bonilla)
TAGS: Oil, Asia, Iran, Prices, Global economy
China, India, South Korea and Japan are likely to cut their oil imports from Iran in line with recent sanctions, while Iran will probably reduce production, according to Simon Powell, head of Asian Oil and Gas Research at CLSA.
“I think the Asian buyers will realize they can’t raise the wrath of the US and actually raise consumption from Iran,” he said, noting that China, Korea, Japan and India, who purchase half of Iran’s production, will buy slightly less in 2012.
EU sanctions prohibiting the purchase of Iranian oil come into force in May. Now all eyes are on Asian countries, who will decide whether they will follow suit or, on the contrary, increase purchases from Iran while negotiating a better deal for themselves.
Powell believes China will cut its imports from Iran by 50% to 250,000 barrels a day. The country is likely to turn to Africa for extra oil as gasoline demand in China is set to rise considerably in coming years. As for India and Japan, they will probably stick with Iranian oil.
“India will struggle to find a way to pay for Iranian oil and Japan as well. They’ve raised their imports from Iran”, he said. “India doesn’t have relationships to fill the gap that might be created. But they will make the cuts.” However, the US government has recently offered to help India get alternative supplies from Iraq and Saudi Arabia if India gives up Iranian oil, Bloomberg reports.
Iran is unlikely to make a huge discount for Asian importers, so it would probably shed a few dollars, according to experts. But it is likely to reduce its oil production.
“We looked at Iranian production in 2011 of 3.5 million barrels per day. We think they will cut back to 2.9 million through the sanction period,” Powell explained. “It’s not a question of turning off the taps. It’s a question of scaling down.”
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Iran faces a delicate issue. On the one hand it wants to show the world all it’s got and put it at ease, while on the other hand it fears that such show 'n tell will give its enemies a roadmap to bomb it.Saddam Hussein faced a similar dilemma ten years ago. Though he wanted the world to know he had nothing to hide, he also wanted to bluff his archenemy Iran into believing Iraq still had WMD. Bluffing did not go well for Saddam, and it might not go well for Ahmadinejad.But since the price tag for ridding Saddam proved high, maybe we ought to reflect what we are asking of Iran now. On the eve of a threatened attack, we are asking it to take us to the depths of its arsenal and show us all it's got. Such great expectations are a sign we have been talking to our friends too long and are in need of a broader perspective. Exactly when was the last time we asked Pakistan, India, China or Russia to show us their arsenal?“But those countries are not advocating the destruction of Israel.” True, but Israel is not a thorn on their side either. Surely, however, we can see beyond the hyperboles and figure out their underlying purpose. Or have we forgotten that not all Iranians are thrilled with Ahmadinejad?He sure hasn’t forgotten. Nor has he forgotten that that his countrymen hate Israel even more. So he tells them that Israel will be wiped from the face of the earth. Expectantly, this nonsense unites them against a common enemy. It is even a diversion from the misery and isolation brought on by his theocratic regime. Quite clever work by Ahmadinejad -- and not a rial spent or a bullet fired. So why are we letting the crazy talk about destroying Israel get us all worked-up -- to the point of turning the world topsy-turvy again.Can we not see the desperate attempts of an unpopular regime simply trying to hold on?
China buy 500000 barils a day , they increased their their oil import from 250000 after price negociation , india and south africa increased a lot their oil import from iran , japan and south korea dont know.But im fed up with this aggressive countries who try to destroy the economies of other countries and dont respect international law
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