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Investment News and Commentary from Emerging Markets in Asia - China, India and ASEAN

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U.S. Exempts India from Iran Sanctions, but not China

Jun. 12 – The United States has exempted India and six other countries from sanctions after they significantly reduced their imports of Iranian oil. China, however, has been excluded from this exemption as the U.S. Obama Administration believes that the country has not taken substantial action to reduce its imports of Iranian oil. The U.S. is continuing its negotiations with China – Iran’s primary importer of oil.

Under the U.S. sanctions, foreign financial institutions that are doing business with Iran’s central bank to purchase energy resources will be barred from U.S. financial markets. Exemptions on this sanction were given to India, South Korea, Turkey, Taiwan, South Africa, Sri Lanka and Malaysia on Monday, joining 11 other countries that have been previously exempt.

The purpose of these sanctions is to pressure Iran into agreeing under international talks to curtail its nuclear development. The United States and its allies fear that Iran is developing nuclear weaponry, although Iran remains adamant that its nuclear program is only for peaceful use. Iran is scheduled to meet for international talks next week in Russia.

U.S. officials already insist that the implementation of the sanctions (which are set to come into force on June 28) have been very effective – reducing Iranian oil exports from 2.5 million barrels per day in 2011 to roughly 1.2 to 1.8 million barrels per day at present. An embargo by the European Union to further diminish Iranian oil imports will also have a significant impact when it comes into effect on July 1.

“Today’s announcement underscores the success of our sanctions implementation. By reducing Iran’s oil sales, we are sending a decisive message to Iran’s leaders: until they take concrete actions to satisfy the concerns of the international community, they will continue to face increasing isolation and pressure,” U.S. Secretary of State Hillary Clinton said in a statement released on Monday.

China is now the only remaining major importer of Iranian oil, currently buying as much as one-fifth of Iran’s crude exports. China insists that it will push for a diplomatic solution to the Iranian nuclear issue, rather than reverting to sanctions. A spokesman from the Chinese embassy in Washington said that his government “opposes unilateral sanctions imposed by one country on others.”

Although China has not received a waiver, it does not necessarily mean that the United States will impose sanctions on the country. Last week, a U.S. official stated that it would take a lot of time for Washington to gather the evidence to support the implementation of sanctions on countries that have processed oil transactions with Iran. China is currently involved in healthy negotiations with the U.S. on this issue, and remains an important partner in the efforts to pressure Iran into halting its nuclear program.

A senior official has stated that while “we may have different perceptions of sanctions at different times, [China has] shown that it’s committed to a dual-track approach of both engagement and pressure, including sanctions.”

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