As U.S. starts oil sanctions against Iran, major buyers get waivers

By Jane Chung and Osamu Tsukimori

SEOUL/TOKYO (Reuters) - The United States reintroduced sanctions against Iranian oil on Monday while giving some of Washington's closest allies exemptions that allow Tehran's biggest customers, mostly in Asia, to keep buying crude for now.

Washington has restored measures lifted under a 2015 nuclear deal negotiated with Tehran by the administration of President Barack Obama.

President Donald Trump's administration added 300 new designations including Iran's oil, shipping, insurance and banking sectors, aiming to cripple Iran's main export revenues from the petroleum industry.

Despite this, Iran will continue to sell some oil as Washington said on Friday it would temporarily allow eight importers to keep buying Iranian supplies.

It did not identify who had received the exemptions, which will last up to 180 days and have been granted on the basis that importers have already slashed purchases and will further reduce them in the future.

It was not clear yet what individual volumes or aggregate volume the waivers entail. During the previous wave of sanctions on Iran in 2012 exemptions were given to China, India, Taiwan, Japan, Turkey and EU countries such as Italy, Greece and Spain for a total amount of over 1 million barrels per day.

South Korea said on Monday it had been granted a waiver to continue at least temporarily importing condensate from Iran and running financial transactions with the Middle Eastern country. Condensate - a super-light crude oil - is a critical feedstock for South Korea's petrochemical industry.

South Korea, a U.S. ally and one of Asia's biggest buyers of Iranian oil, asked Washington for "maximum flexibility" last week, after some of its construction firms cancelled energy-related contracts in Iran due to financing difficulties.

Japan said on Monday it was in close communication with the United States on the measures, although Chief Cabinet Secretary Yoshihide Suga declined to provide details.

India's Oil Minister Dharmendra Pradhan confirmed on Saturday that the country, Iran's top oil client after China, had won a waiver from the U.S. sanctions after a 'forceful campaign' by Prime Minister Narendra Modi.

India hopes to continue to buy about 1.25 million tonnes of oil a month until the end of the fiscal year to March 31, unchanged from November's level, a government official said.

China is also seeking waivers, although it remained unclear on Monday what volumes, if any, it would be allowed to purchase.

The Chinese Foreign Ministry reiterated its objections to sanctions, but would not directly say whether China had been granted an exemption.

Turkish Finance Minister Berat Albayrak said on Monday Turkey had been told it will receive a waiver but gave no detail.

Some European countries may also receive exemptions.

Iran's biggest oil buyers in recent years have been China, India, South Korea, Turkey, Italy, the United Arab Emirates and Japan.

Click here to see a GRAPHIC on Iranian oil: 40 years of revolution, war, sanctions and bans.

FALLING EXPORTS

Iran said it would ignore the sanctions.

"It will be difficult for Iran to maximise exports when virtually all trade in oil is cleared in U.S. dollars, putting international oil companies, many national oil companies, traders and banks off limits," said Homayoun Falakshahi from the consultancy Wood Mackenzie.

Crude exports contribute one-third of Iran's government revenues. Exports peaked at 2.8 million barrels per day in April, including 300,000 barrels per day of condensate, but have fallen to 1.8 million bpd since then, according to WoodMac, which expects volumes to drop further to 1 million bpd.

Oil prices rallied above $85 per barrel in October on fears of a steep decline in Iranian exports. Prices have eased since then on expectations that some buyers would receive exemptions and were flat at around $73 on Monday.

"U.S. sanctions on Iran proved to be less severe than previously anticipated," said Hussein Sayed, chief market strategist at futures brokerage FXTM.

"Exempting eight countries from the U.S. sanctions means Iranian oil will continue to flow and there's no longer risk of a supply shortage," he said.

(Reporting By Jane Chung in SEOUL, Kaori Kaneko and Osamu Tsukimori in TOKYO, and Ben Blanchard in BEIJING; Additional Reporting by Nidhi Verma in NEW DELHI; Writing by Henning Gloystein and Dmitry Zhdannikov; Editing by Janet Lawrence)