Baku, Azerbaijan, Oct.4
By Leman Zeynalova – Trend:
Under every scenario, imports of Iranian oil into the EU, Japan and South Korea are heavily subdued, according to the report of Fitch Solutions Macro Research (a unit of Fitch Group).
The company believes that buyers in these countries have more substantial exposures to the US market and to US dollar financing.
“Given the complex and overlapping nature of sanctions, we believe that many companies would hold back from trade with Iran, even were the US to extend waivers on crude. For these same reasons, the various attempts by the EU to encourage its companies to continue trading with and investing in Iran are unlikely to be effective in regards to oil,” said the report.
From this perspective, the steep fall in imports into China, India and Turkey - if sustained - is a major cause for concern, according to Fitch Solutions.
“China has the capacity to circumvent sanctions and, we believe, will continue to purchase Iranian crude, although volumes may fluctuate. China-Iran oil trade has become increasingly entangled with the US-China trade dispute. However, it is difficult to see any scenario under which China substantially reduces its Iranian imports, in response to US pressure. All other buyers, though, will be reliant on waivers,” said the company.
Fitch Solutions reminded that India and Turkey are two of Iran's main buyers and have a heavy dependence on imported crude in general.
“In addition, both markets' currencies are under significant pressure, raising the cost of dollar-denominated oil. Consumers face rising prices at the pumps, placing additional strain on the already troubled Turkish economy and raising political risks for President Modi, ahead of the upcoming elections in India. This gives them both strong incentive to maintain their purchases from Iran, given that Iran (we can assume) will be offering its crude on highly concessional terms. The question is how far they are able to push back on the US.”
Sanctions are due to be re-imposed on Iran's oil industry on November 4. The move comes after US President Donald Trump decided to withdraw his country from the 2015 nuclear deal in May.
The US has said that countries or companies that conduct transactions with Iran are liable to face secondary sanctions.
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