South Korea may have to suspend Iran oil imports at the end of this month
Gasoline prices in the local market are likely to climb by about 300 won ($0.26) per liter for several weeks in the wake of the European Union’s tightened sanctions on Iran, analysts said Monday.
Considering the 50-liter fuel tank of an ordinary car, the situation means a surge by 15,000 won in consumer prices when a driver fills up his gasoline-empty car at a gas station.
The European Union legislated rules in March to stop insurance coverage on all tankers carrying Iranian crude oil starting July 1 as part of sanctions on the Middle East country to make it give up its nuclear program.
But Seoul officials reportedly said the EU may apply for the halt to insurance coverage to Korea at the end of this month in consideration of the some 40-day period of oil transportation.
Iranian oil accounted for 9.4 percent of Korea’s crude oil imports ― or 87 million barrels out of the total 930 million barrels ― last year.
Under the situation, the hike in gasoline prices is unavoidable. Considering disconnecting contacts in consideration of oil shipment period, the prices could likely be affected before July.
Some market observers issue the possibility that a price hike will start later this month, citing psychological factors.
They predict the price hike level will be at least by 200 won per liter and may surpass the level of 300 won.
The EU’s sanctions on Iran would result in an imbalance of global crude supply and demand and an increase of oil prices, weighing on the Korean economy and exacerbating Korea’s trade terms with Iran, the Ministry of Knowledge Economy said in a recent statement.
Seoul has so far focused only on negotiations with the U.S. to be exempted from a law that bans economic entities dealing with the Iranian central bank from doing business with U.S.-based financial institutions. Because the Iranian central bank collects the country’s oil export revenues, the law essentially forces other countries to stop importing oil from Iran.
But even if Korea is exempted from the U.S. National Defense Authorization Act, it won’t be able to import Iranian crude if the European insurers do not cover the tankers that transport it.
Unlike the U.S. Act, the EU rule does not have any grounds to permit exceptions. And it will be difficult to reach an agreement with the EU, which consists of 27 member countries, to give a grace period for Korean tankers.
By Kim Yon-se (email@example.com