DUBAI: Iran’s biggest oil customers from across Asia are flocking to alternative Middle East suppliers this month under renewed US pressure to stop buying Iranian crude and unprecedented tension over Tehran’s nuclear program.
While US Treasury Secretary Timothy Geithner toured Asia this week to drum up support for US sanctions to starve Tehran of oil revenues, Iran’s third largest oil buyer Japan was asking Saudi Arabia and the United Arab Emirates (UAE) for more oil.
Over the next few days the leader of Iran’s fourth biggest customer, South Korea, will meet oil-exporting Oman and UAE officials to ensure stable energy supplies.
And Chinese Premier Wen Jiabao will visit Saudi Arabia and the UAE as Iran’s biggest oil consumer joins a scramble for an Iran oil insurance policy.
"They are coming under huge pressure from the Americans to supplement the anticipated EU oil embargo and therefore they have to find alternative supplies," said Paul Stevens, senior energy analyst at the Royal Institute of International Affairs in London.
With the UAE, Kuwait and minor oil exporters Qatar and Oman already producing close to capacity, the only realistic alternative source of over a million barrels a day (bpd) of heavy sour crude that Iran supplies to Asia is Saudi Arabia.
But the world’s largest oil supplier, which is producing less than 10 million barrels a day says it could produce 12.5 million bpd, though will be wary of provoking its regional and OPEC rival with overt offers to Iran’s Asian customers.
"I’m not concerned about their ability to replace Iranian crude. My concern is about their willingness to do so," said Stevens, who specializes in Middle East energy politics.
"They live in a very rough neighborhood and if they do replace Iranian crude it will be seen as a very hostile act by Iran."
Iran exports about 2.6 million bpd oil, of which about 50,000 bpd is refined products, the International Energy Agency (IEA) estimates.
The United States and its European Union allies are piling pressure on Iran to curb its nuclear program, worried that Tehran is attempting to develop atomic weapons. Iran denies the charges.
Escalating tensions over Iran’s enrichment of uranium has raised fears about global oil supplies and even military conflict, with an Iranian nuclear scientist killed in a bomb attack on Wednesday as another US aircraft carrier sailed towards the Gulf.
Iran has warned it could block the vital Strait of Hormuz, through which most of the oil produced in the Middle East is shipped, mainly to Asia.
After getting assurances this week that it would be first in line for any extra oil the UAE can squeeze out of its oilfields, Tokyo pledged on Thursday to take action to cut Iranian oil imports.
China has cut oil imports from Iran in a dispute over contract terms and has been looking for alternative supplies but has so far rebuffed US sanctions aimed at starving Iran of the oil revenues.
India, Iran’s second biggest crude buyer, is not known to be holding ministerial meetings with alternative suppliers in the Middle East this month. But some Indian refiners have increased their Saudi, Iraqi and UAE crude buying as sanctions make it difficult for them to pay Tehran for oil.
An Indian delegation will visit Tehran from Jan. 16-21 to explore alternative routes of payment to ensure supplies without breaching sanctions.
China’s Wen and South Korean Prime Minister Kim Hwang-sik are also expected to attend the green-energy focused World Future Energy Summit in the UAE capital Abu Dhabi next week.
EU states are due to agree new sanctions on Iran over its nuclear program at a meeting of EU foreign ministers on Jan. 23. They have already agreed in principle to ban imports of Iranian oil.
But with some of Europe’s shakiest economies also being the bloc’s biggest buyers of Iranian crude, the EU looks set to phase in any ban slowly to allow them to find other suppliers to soften the blow before implementing an embargo.