South Korea will be forced to halt almost all of its oil imports from Iran starting next month, with the European Union's sanctions on insurance for Iranian oil shipments set to take effect from July 1, a Seoul official said Wednesday.
Seoul has been in negotiations with the EU since March to win an exemption from the insurance ban, but last-minute prospects went flat after Iran and world powers failed to reach a breakthrough over Teheran's nuclear ambition during talks in Moscow this week, the senior official at Seoul's foreign ministry said.
"Considering the progress made until now during the negotiations with the EU, we think it would be difficult for the EU to grant an exemption from the insurance ban to Korea," the official said on the condition of anonymity.
The EU decided to impose the insurance ban to punish Iran for its nuclear drive and it will effectively ban South Korean oil tankers from carrying Iranian oil because European insurance firms cover most Iranian oil shipments.
EU's foreign ministers are set to hold talks next Monday to discuss the insurance ban, but the chances for South Korea to win a waiver are very slim, the official said.
"The EU's sanctions on Iran are coupled with the nuclear talks with Iran," the official said. "As the talks in Moscow failed to produce an agreement, the EU's insurance ban will be implemented from July 1 as planned."
Two South Korean shipping companies, SK Shipping and Hyundai Merchant Marine, have already halted carrying Iranian crude oil since early this month, company officials said.
The impact of the EU's insurance ban is likely to be limited as South Korea has significantly cut its oil imports from Iran and turned to other oil producers in the Middle East to make up for expected shortages, the official said.
Last year, Iranian crude oil accounted for about 10 percent of South Korea's total oil imports, but crude imports from Iran dropped by more than 20 percent so far this year, compared with the same period last year, according to government data.
Although Japan, one of the major importers of Iranian oil along with South Korea, is taking steps to offer government guarantees on insurance for Iranian crude shipments, Seoul has not been considering such a measure, the official said.
"The Japanese government aims to offer insurance coverage of up to US$7.6 billion for each tanker carrying Iranian crude. Practically speaking, we can't afford such insurance," the official said.
South Korea secured a waiver from new U.S. financial sanctions against Iran on June 12 after significantly cutting its imports of Iranian crude oil this year.
Source: Yonhap