The U.S. has decided to end sanctions waivers on Iranian crude oil that let eight countries, including South Korea to import crude oil from Iran. After the U.S. exited from the Iran nuclear deal in May last year, it has been escalating sanctions pressure on Iran and granted temporary waivers to eight countries to continue the purchase of Iranian oil for 180 days. After the current waivers expire on May 2, all countries will have to stop importing crude oil from Iran or be subject to U.S. sanctions.
As the waivers were temporary, a complete ban on the import of Iranian oil has been expected from the beginning. Earlier this month, the Trump administration applied maximum pressure against Iran by designating Iran’s Islamic Revolutionary Guard Corps (IRGC) a terrorist organization. The global oil price soared right after the announcement, which made the Korean government and the domestic oil refining industry perplexed as they had expected the sanctions would continue.
South Korea imported 14 percent of its total oil import from Iran in March last year, being the country with the second highest dependence on Iranian oil following Saudi Arabia. Before the country resumed oil import from Iran this year, there had been no oil import from Iran at all at the end of last year. Iranian oil accounted for 5.4 percent of the total oil import of South Korea in January and February this year. As South Korea has diversified the sources of oil import, there will not likely be a setback in supply for the time being. Our heavy dependence on Iranian condensates, however, could have a severe impact on domestic businesses. The government and the industry concerned should closely coordinate to minimize any possible impacts.
Tough U.S. sanctions on Iran have significant implications for North Korea. By applying “maximum pressure” that leaves no room for exception, the Trump administration has sent a clear message to the international society that all countries, including allies, who do not comply with U.S. policies, will be subject to sanctions. Against the backdrop, where nuclear talks between Washington and Pyongyang have been stalled, North Korea is refusing to work toward denuclearization and South Korea is seeking sanctions relief for inter-Korean economic projects. Both Koreas should look back on themselves and see if Washington’s decision with Iran is a warning message to both Koreas.