TOKYO/HONG KONG (Reuters) - Japanese trading houses will cut Iranian crude imports from April, industry sources said on Tuesday, in the latest sign that Western sanctions are curbing the flow of Tehran’s oil to its biggest customers in Asia.
Insurers are showing growing reluctance to cover tankers carrying Iranian oil and a senior official at a unit of Chinese refiner Sinopec Corp (0386.HK) said it was increasingly wary of crude from Iran due to the supply threat posed by sanctions.
The United States and European Union have tightened sanctions on Iran’s oil trade as they seek to reduce the flow of petrodollars and force Tehran to halt a nuclear program the West suspects is intended to produce weapons.
“Iranian crude currently is a rather sensitive subject,” Sinopec Shanghai Petrochemicals (0338.HK) Chief Financial Officer Ye Guohua told reporters at an earnings briefing. “This year we will continue to be cautious about Iranian crude imports.”
China, India, Japan and South Korea are the four biggest buyers of Iranian crude in Asia, and all of them have cut imports. The sanctions are making it hard for refiners who want to continue importing to find shippers, insurers to underwrite trade and banks to clear payments.
Iran sanctions graphic link.reuters.com/qeh85s
Industry sources in Japan said that trading houses and refiners there would reduce Iranian crude imports by about 60,000 barrels per day (bpd) in April.
The reduction is the equivalent to about 18.5 percent of the 322,900 bpd that Japan imported in the first two months of the year, according to the latest government data available.
The cuts come even after the United States in March exempted Japan and 10 EU nations from sanctions due to take effect in July because they have significantly cut purchases of Iranian oil. Soon after receiving the exemption, Finance Minister Jun Azumi said Japan would continue to cut imports of Iranian oil.
Washington has pointed to the world’s third-largest importer, Japan, as an example for other Iranian crude buyers as the country reduced purchases even though it needed more oil to help meet rising demand after the earthquake, tsunami and nuclear disaster in March 2011.
British Prime Minister David Cameron, arriving in Tokyo on Tuesday, said he would tell his hosts it was important to keep up the pressure on Tehran.
“We know that the Japanese have particular needs and a particular reliance on imported oil,” he told reporters. “Obviously I will be saying how important it is that we maximize the pressure on Iran... The stronger the oil embargo can be, the better.”
On Monday, a senior industry official told Reuters that Hong Kong maritime insurers would not provide full cover to tankers carrying Iranian oil after EU sanctions take effect from July, another blow to Chinese importers struggling to find ways around the measures.
China, the world’s second-largest oil consumer, is Iran’s largest trading partner and biggest oil client that buys up 20 percent of the Islamic Republic’s total crude exports. Iran is China’s No.3 supplier after Saudi Arabia and Angola.
Arthur Bowring, managing director of the Hong Kong Shipowners Association, said that as more insurers confirm they will soon halt or sharply reduce coverage to tankers operating in Iran, China’s government may need to step in and take the risk to get contracted crude supplies from Tehran.
The EU sanctions on Tehran will close off the European re-insurance market for all tankers carrying Iranian oil anywhere in the world. Reinsurance helps spread the risk when the coverage surpasses what commercial insurers can handle.
Japan and South Korea have lobbied for exemptions to the EU sanctions, but insurance and shipping executives say a complete ban looks likely.
Additional reporting by Florence Tan in Singapore and Mohammed Abbas in Tokyo; Writing by Alex Richardson; Editing by Ron Popeski