Turkey loath to replace Iranian oil with Saudi and UAE supplies under US sanctions pressure

Turkey loath to replace Iranian oil with Saudi and UAE supplies under US sanctions pressure
The STAR refinery, located near Izmir, was opened last October as Turkey's first new refinery since 1975. / Vugar Amrullayev.
By bne IntelliNews April 25, 2019

Turkey is highly reluctant to buy more crude oil from Saudi Arabia and the United Arab Emirates (UAE) to replace volumes that the US says would breach its new drive to push Iranian oil exports to zero.

“Iranian oil isn’t cheap but there is a big difference [with the price of Saudi and UAE crude],” Turkish Foreign Minister Mevlut Cavusoglu said on April 24, according to state-run TRT television. “The US is taking a decision and wants all countries to comply with it. Why should we pay the price?”

Iran is the third largest supplier of oil to Turkey, which boasts the Middle East’s biggest economy. At the same time, Ankara’s relations with Saudi Arabia and its close ally UAE are fraught, especially given unresolved rows over the brutal murder of Saudi journalist Jamal Khashoggi in the kingdom’s consulate in Istanbul last October by a Saudi hit squad. The US has said it aims to keep world oil prices stable by working with Saudi Arabia and UAE to replace Iranian oil barred from the market.

Ankara opposed to sanctions approach
On a broader perspective, Turkey’s Erdogan administration remains opposed to the entire sanctions regime targeted at Iran by the US. It last week said it would set up a financial channel via which US sanctions imposed against the Islamic Republic could be circumvented.

China, India and Turkey aren’t necessarily committed to bringing imports of Iranian crude down to zero and the US will have to negotiate "over the terms of their withdrawal from Iran or be prepared to deal with their noncompliance,” according to a report by Richard Nephew published by Columbia University’s Center on Global Energy Policy, cited by Bloomberg.

In January, Iran accounted for just over 12% of Turkey’s oil imports, according to the latest available official data. Iraq was the top supplier with almost 24%, followed by Russia with 15%. Saudi Arabia ranked 8th with 4.3%. Turkey only imported diesel fuel from the UAE in January.

Pointing to further complications for Turkey when it comes to the US plan for international oil buyers to rely on more Saudi and UAE oil flows, Cavusoglu claimed: “Our refineries aren’t compatible with oil purchased from [these two countries]. Their technology must be upgraded. And for that, they should be shut down for a while. On the other hand, it is costly.”

Central bank chief: US “delusional”
Separately, on April 24 Iran’s central bank governor Abdolnasser Hemmati called the US objective of cutting his nation’s oil exports to zero “delusional”. He also urged Iranian authorities to take immediate action to make up for lost oil revenue, including by promoting non-oil exports.

“Any reduction in exports and the government’s equivalent revenue in rials should be urgently made up for by cutting costs or through other sources of revenue,” the official Islamic Republic News Agency cited Hemmati as saying.

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