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South Africa still off the hook on Iranian oil

As a result of a South African cabinet meeting last June, a cabinet statement that followed carried comment on the sanctions imposed by the USA against foreign banks that deal in petroleum based-transactions involving Iranian banks, South Africa gaining exemption in the short term, having now enjoyed 30 days (Mon 30 July).

The statement read at the time:- “Cabinet noted that the United States of America has granted South Africa a 180 day exemption against the Iranian oil sanctions that  commenced  1 July 2012.

The USA imposed sanctions against Iran apply in terms of which financial institutions which continue to transact with the Iranian banks, and in particular, the Islamic Republic Bank of Iran, risk being cut from the USA financial system. The petroleum based sanctions came into effect internationally on 1 July 2012.

The European Union (EU) followed suit by imposing additional sanctions on Iran. Of importance to the South African refining sector, the EU put a ban on the provision of insurance and reinsurance by EU insurers to the State of Iran and Iranian owned companies. Furthermore the EU decided to ban new contracts to import petroleum and petroleum products from Iran and to end existing contracts by 1 July 2012.

The sanctions impact negatively on the long term sustainability of South Africa’s refining sector due to increases in both the capital and operational costs to alter the crude diets for the respective refineries.

Given the impact on the South African refining sector and ultimately the security of supply, South Africa opted to apply for an exemption from the USA government. On 11 June 2012, the USA Secretary of State announced that South Africa, along with countries such as Malaysia, India, Republic of South Korea and Sri Lanka has been grated the exemption by the USA.

This means that the sanctions will not apply to South African financial institutions which transact with the Islamic Republic of Iran for the fiscal year 2012. The exemption period is 180 days (6 months), currently being enjoyed by South Africa, and is potentially renewable provided there has been a significant reduction of the crude oil from Iran during the period of the exemption.

It must be noted that this exemption is only applicable to petroleum based transactions. This followed intense negotiations between South Africa and United States of America.

 

Posted in Cabinet,Presidential, Finance, economic, Fuel,oil,renewables, Mining, beneficiation, Trade & Industry0 Comments


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