With just days to go before U.S. sanctions take effect on Iran's oil sector on November 5, Tehran’s top two customers – India and China -- are resisting Washington’s call to reduce purchases to zero, arguing there are not sufficient supplies worldwide to replace them, media are reporting.
Washington is reimposing the sanctions on Iran after having withdrawn from Iran's 2015 nuclear deal with world powers. But China -- Tehran's biggest customer -- has publicly committed to honoring the deal and has said it will keep importing Iranian oil, despite Washington's threat to block Chinese companies from doing business in the U.S. market if they defy the sanctions.
While two of Iran's other big customers in Asia -- Japan and South Korea -- have already stopped purchasing Iranian oil, the prospect of continued sales to China and India, the two biggest customers, appears to have bolstered confidence in Tehran.
Iranian Vice President Eshaq Jahangir said on October 28 that he doesn't expect Iran's oil exports to fall below 1 million barrels a day, although that level of export would still represent a large cut from the peak of 2.5 million barrels a day reached in April before the United States announced it was reimposing sanctions.
Chinese Foreign Ministry spokeswoman Hua Chunying told reporters last week that the question "boils down to whether we should continue to implement" the nuclear deal. "China's position in this regard has been made very clear."
China, which imports between 500,000-800,000 barrels a day from Iran or about $1.5 billion worth every month, may be less concerned about a U.S. backlash than other countries facing U.S. sanctions because it has the world's second-largest economy and it is already embroiled in a bitter trade war with Washington.
China is also working with European powers that signed the nuclear deal to create a mechanism to pay for Iranian oil that bypasses the U.S. sanctions by not using U.S. dollars. Global trade in oil is traditionally conducted in dollars.
China has pushed its own currency, the yuan, as an alternative to the dollar and may be betting that the U.S. sanctions will entice more global traders to conduct their transactions in yuan instead of dollars.
Iran is also a strategic partner in China’s Silk Belt and Road initiative, which aims to create trade and infrastructure routes across Eurasia and Africa.
India, Iran’s second-biggest oil customer after China, also has traditionally close relations with Tehran. Its official stance is that it does not recognize "unilateral" sanctions that are not imposed by the United Nations.
But New Delhi also has sought to appease Washington recently by curbing its Iranian oil imports and seeking waivers from the sanctions so it can continue importing some Iranian oil.
India is in a vulnerable position because it imports 80 percent of its oil needs.
An Indian government source told Reuters that New Delhi has told Washington that the high and rising cost of oil will prevent it from zeroing out Iranian purchases any time soon.
“We cannot end oil imports from Iran at a time when alternatives are costly," Reuters quoted the source, whom it did not identify, as saying.
Reuters cited an unidentified U.S. diplomat as confirming the discussions with New Delhi and saying that Washington may grant India and other countries limited waivers from the sanctions.
India typically imports more than 500,000 barrels of Iranian oil per day but has reduced that level in recent months, according to official data.
Reuters reported that Turkey, Iran’s fourth-biggest crude buyer, also is ready to defy the U.S. sanctions, which President Recep Tayyip Erdogan has openly criticized.
Reuters reported that Turkey has already cut its Iranian oil imports in half, and it could reduce them further to zero but would prefer to continue some purchases.
Turkey, like India, is seeking a waiver from the U.S. sanctions, but officials said they are not sure they will get one.
Despite Beijing's open commitment to continuing oil purchases and other trade with Iran, some of its giant corporations have appeared less willing to defy U.S. sanctions and risk being shut out of the U.S. marketplace.
Reuters reported that two Chinese energy giants -- Sinopec Group and China National Petroleum Corp (CNPC) -- have not placed orders for Iranian oil for November because of concerns about the sanctions.
The large Indian private oil refiner Reliance also has announced it has stopped buying Iranian oil out of concern about the sanctions.
Saudi Arabia, Iran's rival both in oil and Middle Eastern political matters, also reportedly is seeking to entice Tehran's big Asian customers by offering to make up oil shortfalls coming out of Iran.
The global price of oil peaked just below $87 a barrel this month, a four-year high.
Amid concerns that a price spike could damage the United States and its allies, Reuters reported that the administration is considering limited waivers for some Iranian customers until Russia and Saudi Arabia make good on pledges to increase oil supplies in 2019.
U.S. Treasury Secretary Steven Mnuchin told the news agency that in order to obtain waivers, countries would first have to reduce purchases of Iranian oil by more than the 20 percent cuts they made under a previous round of global sanctions on Iran.