By BENOÎT FAUCON, RAKESH SHARMA and SE YOUNG LEE
Iran warned Saudi Arabia against delivering additional oil to world markets to compensate for a drop in Iranian oil exports if they are hit by sanctions, as the U.S. continued to have mixed success in convincing Iran's major oil customers to reduce their purchases of Iranian oil.
Iran has warned Saudi Arabia not to increase its oil production to cover the shortfall as the West's sanctions on Iran start to bite. Benoit Faucon and James Herron tell us about Iran and what this all means for oil prices.
The warning from Tehran came a day after Saudi Arabia's oil minister publicly pledged to boost the kingdom's production by as much as 2.7 million barrels a day, more than Iran exports, if there was market demand for more oil.
Though Saudi oil minister Ali Naimi didn't mention Iran, the pledge came as the West is ratcheting up pressure on the Islamic Republic over its nuclear program by targeting its exports.
"We invite Saudi officials to further reflect on and consider" their pledge to make up for any cut in oil exports, Iran's Foreign Minister Ali Akbar Salehi said, in comments carried by state news agency IRNA.
Although indirect, the exchange marked the first verbal sparring between Iran and one of the Western-allied monarchies directly across the Persian Gulf.
At the end of last year, U.S. President Barack Obama signed a law imposing sanctions against banks that trade with the Iran's central bank, through which much of Iranian oil sales are cleared. The European Union also has agreed in principle on an Iranian oil-import ban. Neither effort would go into effect until later this year.
Mr. Salehi said Mr. Naimi's pledges "will create all possible problems later" between Saudi Arabia and its Iranian neighbor and called them "not friendly signals."
Iran has threatened for several weeks to try to close the Strait of Hormuz, where one-third of the world's traded oil passes, if sanctions are imposed, while the U.S. has warned Iran it would do whatever is necessary to keep the strait open.
India said on Tuesday it would continue to purchase Iranian oil and wouldn't seek a waiver from the U.S. to sidestep the sanctions—effectively saying it intended to ignore the U.S. sanctions regime. Under the U.S. sanctions program, President Obama can grant exceptions and waivers from U.S.-imposed penalties to countries that reduce Iranian oil purchases.
Indian Foreign Secretary Ranjan Mathai said his government would only recognize multilateral sanctions imposed by the United Nations.
"We have accepted sanctions which are made by the United Nations. Other sanctions do not apply to individual countries. We don't accept that position," Mr. Mathai told a news conference.
India gets about three-quarters of the crude oil it requires through imports. Iran is its second-largest supplier after Saudi Arabia.
"We continue to buy oil from Iran. A large number of European Union countries also buy oil from Iran," Mr. Mathai said.
Mr. Mathai said a multi-ministerial Indian delegation is on its way to Tehran "to work out a mechanism for uninterrupted purchase of oil from Iran and to work out a financing mechanism."
South Korea said it will continue bilateral discussions with the U.S. to find an acceptable compromise on sanctions against Iran's crude-oil exports, as the resource-poor country attempts to safeguard its energy security without alienating its key ally and trade partner.
South Korea gets nearly 10% of its crude oil from Iran, and would have difficulty finding alternative supplies quickly. The government has said it will look to secure alternative supplies to Iranian crude from Iraq and Kuwait.
A delegation of U.S. officials led by Robert Einhorn, special adviser on nonproliferation and arms control, met with South Korean officials on Tuesday to solicit Seoul's cooperation on U.S.-led efforts to curtail Iran's oil revenue.
The U.S. delegation stressed the importance of resolving the standoff over Iran's nuclear program through global cooperation, the South Korean government said.
The U.S. seeks a gradual reduction of Iranian oil imports, to avoid disrupting the global crude-oil market or hurting its allies, though the rising tensions with Iran have already pushed crude prices higher.
In response, South Korean officials expressed their desire to go along with the multilateral effort but stressed the importance of minimizing the impact of the sanctions on the Korean economy, which is almost wholly dependent on overseas producers for its energy needs.
"The two sides agreed to continue efforts to reach an amicable solution that takes into account the interests of our country and companies while achieving the target sought by the U.S.," a South Korean Foreign Ministry spokesman said. The two countries plan additional talks over the matter but didn't specify any dates.
Washington can choose to grant Seoul either an exception or a waiver to its sanctions. To be an exception, South Korea would have 180 days from the date the U.S. law took effect to reduce Iranian crude imports, while for a waiver it would have to act within a 120-day period in a way that would reinforce U.S. security.
Seoul is more likely to opt to be considered as an exception, according to people familiar with the matter, a path that would require it to reduce Iranian crude imports significantly by the end of June.
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