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Iranian oil sanctions: US exempts 11 nations

The American government will exempt 10 European countries plus Japan from financial sanctions due to their efforts to reduce their dependence on Iranian oil.

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"We have told the US side that the trend of decrease would accelerate and Iranian crude imports will be reduced substantially from now on," said Chief Cabinet Secretary Osamu Fujimura.

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Japan had already reduced its crude imports from Tehran by 15 to 22 percent in the second half of 2011, while the Asian nation’s major oil firms promised to comply with the agreement between the government and the US.

Although India publicly rejects imposing sanctions to Tehran, it is reportedly pressing its oil refiners behind the scenes to implement significant cuts in imports from the Islamic state. The government is said to be looking for 15 percent cuts while working to safeguard lost supplies through fellow OPEC members Saudi Arabia and Iraq.   

Meanwhile China, top buyer of Iranian crude with a 20 percent share, has temporarily slashed imports by 290,000 barrels a day due to a payment dispute.  Still, experts estimate it is unlikely to keep such cuts for a prolonged period because the dispute is already resolved.  

Chinese petroleum imports “may rebound in the following months but are unlikely to reach average levels purchased last year,” Gong Jinshuang, of the China National Petroleum Corp., told Bloomberg News. “Chinese refiners need to consider the political risk.” 

Furthermore, China has already increased imports from Saudi Arabia, the world’s biggest oil producer and the sole energy provider capable of redressing energy market disruptions. In February, it boosted its Saudi imports by 260,000 barrels a day.

As political tensions rise and an Israeli military strike against Iranian nuclear facilities looms, the viability of the sanctions seems to be connected to the degree of Saudi willingness and ability to make up for the growing Iranian deficit.

"My only mission is to convey to you that there is no supply shortage in the market," said Saudi oil minister Ali al-Naimi Tuesday. "We are ready and willing to put more oil on the market, but you need a buyer."

US crude futures prices fell $2.48 Tuesday to $105.61 per barrel, the biggest drop in more than three months following Mr. al-Naimi's statement. On Wednesday, oil recovered most of that loss, closing at $107.64, but by late morning Thursday it was trading down again below $105. Some analysts are skeptical that Saudi Arabia has the spare production capacity to handle a severe disruption in the oil market.

[Reuters material was used in this report.]

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