Turkey still struggling to reduce dependence on Iranian crude

By bne IntelliNews May 15, 2012

Justin Vela in Istanbul -

With the threat of US sanctions hanging over it, Turkey faces a challenge to accelerate diversification of its crude imports away from its reliance on Iran, currently its largest supplier.

Turkish crude oil imports from Iran fell steeply in April following a huge spike in imports in March, according to shipping agency data reported on May 15. However, the cuts leave Ankara far from its promise to reduce imports by 20% compared with last year, and April's volumes came in only marginally below the 2011 average of 200,000 barrels per day (bpd).

That leaves Turkey in danger of being caught up in US sanctions. Scheduled to go into force in June, the restrictions could cut access to American financial institutions for banks that do business with Iranian entities. To avoid the sanctions, Turkey needs to show that it has significantly reduced its Iranian oil purchases by June 28. Japan and 10 European Union countries have already gained exemptions.

Most European refiners have stopped importing crude from Iran. According to trade data compiled by Reuters, the bloc's imports of crude have fallen to around 350,000 bpd in April down from 740,000 bpd the month before. The European Union currently buys about 20% of Iranian oil exports, however, the bloc will halt all imports of Iranian crude by July 1.

Iran remains Turkey's largest crude oil supplier however, followed by Iraq. At just over 18m tonnes, the Persian state provided more than half of Turkey's total crude imports in 2011. The importance of the relationship is mutual. Data from the United States Energy Information Administration shows that around 7% of the Islamic Republic's crude oil exports went to Turkey in 2011.

On March 30, Turkey's Energy Minister Taner Yildiz said that the country plans to diversify its energy imports by purchasing crude oil from Libya. The Libyan imports will reduce the Iranian oil accordingly, Yildiz insisted. At the same time, Turkish state refiner Turpas announced that it plans to cut Iranian imports by up to a fifth.

However, in early May, data revealed Turkish imports in March spiked to 270,000 bpd. Turpas followed that in April by shipping an average of 177,000 barrels per day (bpd), according to shipping agency data from its two import terminals Tutunciftlik and Aliaga.

Though Turkey is traditionally an ally of Iran, the relationship between the pair is undergoing a major transformation, with Ankara moving closer to Washington in recent years. However, given its massive energy needs, Turkey is clearly struggling to quash Iranian crude imports inside the time frame.

However, Turkish analysts are still betting that Ankara's efforts - though clearly limited - to reduce the flow from the south are likely to earn it an exception from the sanctions that have been imposed on some other countries anyway. Shutting a major ally like Turkey off from the US financial system would be unthinkable, they suggest. The leniency is also likely to be beneficial for Washington and Brussels, as it will allow Ankara to maintain dialogue with Tehran.

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