US said to grant Turkey more space on Iranian oil sanctions

By bne IntelliNews December 7, 2012

bne -

In a bid to relieve building tensions with allies, the US is likely to grant a raft of countries, including Turkey, a further six months' exemption from sanctions on buying Iranian oil, unnamed US government sources were quoted as saying on December 6. However, Turkey's "gas-for-gold" arrangement with Iran continues to provoke conflict.

Turkey, India, South Korea and others will be granted a second six-month reprieve from financial sanctions against countries buying Iranian crude as they continue their efforts to reduce purchases from there. A first round of 180-day exemptions - granted mainly to the Asian and African states that are heavily dependent on Iran for oil - is due to end this month.

The likes of Turkey are due to have the extension of their exemptions announced on December 7, the unnamed official told Reuters. China, whose exemption runs to December 25, may also receive its updated waiver that day, the source said.

The sanctions aim to choke off funding to Tehran's nuclear programme by slashing demand for Iran's oil exports. The West suspects that Iran's nuclear programme is enriching uranium to levels that could be used in weapons. Tehran has said that the programme is for the generation of electricity and medical purposes.

Energy-hungry Turkey has struggled to reduce its purchases of Iranian oil, as it faces problems with sourcing hydrocarbons in an immediate neighbourhood that boasts huge reserves but is politically volatile. The country finds its options limited when it comes to buying the oil and gas it needs to power its growing economy - for instance, it's locked in conflict with Baghdad over its attempts to buy Kurdish oil from northern Iraq, while it regularly sees disruptions to infrastructure that taps other sources to the south and east.

However, in July, Turkey received a six-month exemption as it agreed to further cut oil imports from Iran, which declined from 937,463 tonnes in August to 451,467 tonnes in September, according to data from the energy market regulator EPDK.

Still, Ankara has more options when it comes to oil than it does regarding gas, and talks between Turkey and the US over the "gas-for-gold" arrangement - which sees Iran paid for gas in Turkish lira, which it then turns into gold imports - are becoming increasingly fraught.

Earlier this week, Turkish Energy Minister Taner Yildiz told reporters that Turkey held talks with the US on new sanctions against Iran and US officials agreed that sanctions should not cover Turkey's natural gas deal with Iran. He also claimed that Washington has not made any new request for Turkey to make additional cuts in gas imports from Iran.

Meanwhile, according to Hurriyet Daily News, US sources insisted on December 6 that the case is clear. "The law requires additional cuts, so we expect buyers to make additional cuts," a source at the State Department said, according to the newspaper. "While I find it very hard to believe the US State Department didn't remind our Turkish partners that US law requires them to continue significantly reducing purchases toward a permanent end to Iranian imports, US law stands whether they received a warning or not," the official added.

The same day, Turkey's economy minister continued Ankara's apparent strategy to avoid meeting the issue head on. "They call it 'exports' when we sell cucumbers, tomatoes or eggplants. It counts as exports when we sell cars; but it is not simply exports when we sell gold," Zafer Caglayan complained at an Ankara meeting.

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