Iran sanctions are just round the corner. And the last minute haggle continues. The broader energy chessboard is spread out and stakeholders are taking positions - as the sanctions against countries importing Iranian crude becomes effective on June 28. Contradictory reports and statements are pouring in. Washington continues to stress that the sanctions were being complied with - largely. On the other hand, the stance emanating from Tehran portrays 'business as usual.' And to decipher truth from political conjecturing and positioning is difficult - if not impossible - lying somewhere in between. China, the top buyer of Iranian crude in recent years, has been under mounting pressure from the US to restrain its purchases from Iran. Despite hesitation and resistance, in view of its deep economic ties with Iran, at a point in time in recent months China appeared complying with the request - somewhat. Yet most realized the slowdown in Beijing's purchases from Tehran was on account of pricing differences between the two countries. The shrewd tacticians in Beijing definitely wanted a much better deal from Tehran so as to continue buying - despite the growing western pressure. And the deal has been struck. China's oil imports from Iran consequently rebounded sharply in May to nearly match 2011 levels following a steep drop-off earlier this year. China's General Administration of Customs said crude imports from Iran slipped 2.3 percent in May compared with a year earlier, to 2.2 million metric tons, or 524,000 barrels a day - a 35 percent jump from the previous month, allowing Iran to reclaim its spot as China's third-largest supplier. Chinese imports from Iran were though still down nearly 25 percent in the January-to-May period following commercial disputes between China International United Petroleum & Chemical Co., known as Unipec, and National Iranian Oil Co. The deadlock was resolved in mid-February, and purchases began recovering in April. And Beijing is also beginning to assert itself politically in the face of the American onslaught. China is always against one country imposing unilateral sanctions on a certain country, and "it is even less acceptable for such unilateral sanctions to be imposed on a third country," Hong Lie, China's Foreign Ministry spokesman underlined last Thursday. "China's imports do not undermine the interests of a third party, nor do they go against any relevant UN Security Council resolutions," Hong stressed. He then went on to assert: "China's importing of Iranian oil is based on its own economic development needs. This is fully reasonable and legitimate." India, the second largest buyer of Iranian crude is also now taking steps to ensure receiving crude from Tehran. Although it is indeed projected to drop by at least 11 percent this fiscal from 2011/12 figures, yet it would still be procuring a significant 310,000 bpd from Iran. In the entire fiscal year, New Delhi aims to import around 113 million barrels of oil from Iran. In the wake of the impending sanction, one of the major issues that New Delhi has been facing was about finding a way to remit the sales proceeds to Tehran. Since December 2010, Indian refiners have been using Turkey's Halkbank to pay their annual oil import bill of more than $10 billion, after a previous payment channel was blocked. However, this channel was also increasingly under American sight. Finally in January, Tehran and New Delhi agreed to settle 45 percent of the oil trade in rupees to ensure payments continues should any problem arise with the Halkbank. In order to facilitate payment in rupees, India government last week also announced lifting a hefty tax on the rupee payments, a move refiners had awaited before starting to make payments into the account. India's Bharat Petroleum Corp (BPCL) has already begun using the facility. Unlike other refiners, BPCL could not open an account with Halkbank to pay for oil imports to the National Iranian Oil Co (NIOC). Hence it was on a lookout for an alternative channel. BPCL is the first Indian refiner to use rupee payment channel that skirts tightening Western sanctions on Iran's trade. Other Indian refiners are also expected to begin using the new payment facility in a week or two. Japan the third largest buyer of Iranian crude in recent years, has also been taking steps to ensure continued supplies from Iran. Japan's parliament has just approved government guarantees on insurance for crude oil cargoes from Iran, paving the way for it to become the first of Iran's big Asian oil buyers to get round new European Union sanctions. The move allows the Japanese government, which has succeeded in getting a waiver from US financial sanctions, to provide cover of up to $7.6 billion to tankers carrying Iranian crude to Japan. And in the meantime, Japanese trading house Mitsubishi Corp. has also renewed its annual oil purchase deal with Iran despite slashing the overall volume. Besides, another trading house, Toyota Tsusho has been also lifting Iranian crude since April. Japan has approved loadings of 120,000 bpd for both June and July, reports are saying. This was unchanged from May though down significantly from a year earlier. There is a definite pressure on Tehran. Squeeze is definitely there - one can't deny. Volumes are less. Yet the squeeze is not to be fatal - as Washington may have wanted. Iran would survive - one could hence say with some sense of objectivity to this entire issue.
