[home][about][contact] [getting involved] [Educational][Academic] [Media Watch][Views]
US faces sanctions dilemma in East Asia
The ongoing struggle between the United States and Iran over Tehran's nuclear program continues to affect countries in East Asia. Reinforced sanctions from the US, initiated at the end of June, threaten to punish countries that have deviated from Washington's efforts to completely isolate Tehran from the global oil market. This constitutes a major problem for countries in Northeast Asia that import significant portions of their crude oil from Iran.
In particular, both South Korea and Japan clearly recognize Iranian oil as indispensable to their economies, creating an awkward conflict of interests. Despite their relationship and alignment with the United States, Seoul and Tokyo have respectively taken different steps to bypass the sanctions and forestall punitive chastisement from Washington. As noted in an earlier article (see East Asian energy dilemma over Iran, Asia Times Online, January 24, 2012), the sanctions on Iran not only force two of Washington's closest allies to re-evaluate their relationship with the US, but also weaken attempts to denuclearize Iran.
The Barack Obama administration appears heavily invested in finishing what its predecessor began, forcing Iran to surrender its nuclear program by "going directly at their revenue". Even before the enforcement of the most recent sanctions, sources from Iran admitted that oil exports had declined in the span of a year to about 1.5 million barrels per day (bpd) from about 2.5 million. 
However, these harsh losses were not enough for Tehran to concede, which led Washington to assume that more sweeping sanctions had to be enforced, especially ones targeting the market for Iranian oil in East Asia.
East Asia had already begun to reduce imports from Iran. In May alone, South Korea, Japan, China and India had cut imports by 25%, bringing imports down to 999,230 bpd compared with 1,338,193 bpd a year earlier.  Nonetheless, Washington wanted more punitive economic measures to be undertaken against Iran. By fostering enough insecurity around Iranian exports, the US believes it can achieve its goal of isolating Iran without directly forcing states to participate in the sanctions regime.
The South Korean case is revealing. In June, on top of pressure from Washington to import less oil from Iran, South Korea reduced exports to Iran to avoid payment defaults resulting from an overall deficit in the Iranian export market.  Therefore, even if South Korea were not participating in the sanctions regime, a significant loss of faith in Iran's ability to pay for imports would have facilitated Washington's desired objective of isolating Tehran from the international market.
Completely cutting off Iranian oil imports in a short amount of time was out of the question for both Japan and South Korea. Even with the controversial decision to restart its own nuclear power plants, Japan would not have been able to rapidly substitute Iranian oil without major financial loss.
Washington did temporarily exempt both countries from joining the sanctions based on their notable reductions in oil imports since December 2011. While this waiver was permitted, the European Union held steadfast to its decision to block access to tanker insurance starting in July. Without insurance for tankers traversing the high seas, the delivery of crude oil from Iran would have effectively come to a halt. As a result, top Asian purchasers of Iranian oil were forced to continue cutting imports throughout June in preparation for the de facto embargo.
Meanwhile, more desperate than other nations to secure energy, the Japanese Diet (parliament) passed a bill that allowed Tokyo itself to insure oil tankers carrying crude oil from Iran to Japan. At the same time, in reaction to South Korea's decision to halt oil imports in July, Tehran offered to deliver the crude oil in its own tankers, which Seoul quickly accepted.
The US lobby group United Against Nuclear Iran seems almost to have anticipated this when it lobbied the South Korean ship classification society to stop verifying safety and environmental standards for Iran's shipping companies.  Without verification from these maritime bodies, ships from such companies would be prevented from making calls at international ports, effectively limiting the reach of the commercial fleet and its cargo.
Officials in Seoul are eager to find a way both to satisfy South Korea's domestic needs and to secure the country's relationship with the United States. On top of burgeoning energy needs, around 2,900 South Korean companies export to Iran, of which 90% are small or medium enterprises. 
Conscious of the contradictions in maintaining close commercial ties with Iran while staying firmly positioned as a robust ally of the US, South Korean official statements attempt to ameliorate the situation by suggesting that Washington does not actually want to "drive Iran towards a cliff" and that Korea's trade with Iran is at acceptable levels.
However, rhetoric from Washington is predictably harsher. As far as the rest of the world can see, US Secretary of State Clinton is continuing to emphasize her intentions to intensify the isolation and pressure if Iran does not take concrete actions to dismantle its nuclear program.
The timing of the sanctions makes it even more difficult for East Asian economies. At a time of slow economic growth and declining exports, reduction of fuel imports or the increase in the cost of importing energy places a heavier burden on countries struggling to remain competitive in the international market. This is true elsewhere, but the consequences of the ongoing Iran crisis to the economies of South Korea and Japan are more pronounced because of their relatively larger reliance on Iranian oil.
Replacing the oil supply is certainly possible, as many Middle Eastern oil kingdoms have stepped up to offer increased shipments to South Korea and Japan; however, renegotiating and streamlining new oil imports is both challenging and time consuming, and invariably more expensive.
Furthermore, considering how the dispute between Iran and the United States is destabilizing the international oil market, the sanctions come as an unwelcome obstacle to South Korea and Japan's (and many others') drive towards economic recovery and growth. At the same time, Seoul and Tokyo's willingness to find ways to continue purchasing oil and transacting goods with Iran undermines Washington's sanctions-based approach towards denuclearizing the Middle East country.
To top it off, it is not clear whether Iran would actually surrender its nuclear program because it faces increasing economic pressure. As the New York Times has noted, this may be the most comprehensive economic sanctions regime that the US initiated since imposing sanctions on raw materials going to Imperial Japan in the 1930s and '40s, which of course hastened the start of the Pacific War.
More prevalently, while the tensions are not immediately obvious, South Korea and Japan's forced self-harm to their own economic interests may have deep consequences for the future of the trans-Pacific relationship.