Oil minnow Sri Lanka has most reasons to worry about Iran oil
COLOMBO (Reuters) – Sri Lanka may be a minnow in the oil world, but a near total reliance on Iranian crude imports means it has more reason than most to find a way to avoid being caught in the clutches of U.S. sanctions.
The island’s only refinery — the 50,000 barrels-a-day Sapugaskanda refinery — is almost entirely reliant on imports of Iran’s crude. Switching to alternatives is not easy because the refinery has been configured to handle Iran’s high-sulphur and high-density crude oil.
“We don’t have any other alternative than getting oil from Iran,” Petroleum Resources Minister Susil Premajayantha told Reuters. “Our main problem is that you can’t use all types of crude here for our machines.”
The Indian Ocean island is in a virtual straitjacket as the United States tries to tighten the noose on Iran to persuade Tehran to rein in its nuclear ambitions.
The United States is Sri Lanka’s biggest trade partner, so much is at stake in its relationship with Washington.
The Sapugaskanda refinery relies on Iran crude, but for Sri Lanka to qualify for a waiver from the U.S. sanctions it would have to demonstrate to Washington a significant cut in the crude it imports from the world’s fifth-largest oil exporter.
On the other hand, Sri Lanka’s government has moved closer to China and Russia, two countries that oppose the U.S. sanctions, after pressure from the United States to address allegations of war crimes at the end of its 25-year civil war with the Tamil Tigers in 2009 strained ties with Washington.
U.S. President Barack Obama signed a new law on New Year’s Eve that imposed sanctions on financial institutions that deal with Iran’s central bank, which clears oil payments.
Washington has already moved to impose sanctions on a Chinese oil company and ones in Singapore and the United Arab Emirates, although Sri Lanka’s central bank governor said the island wouldn’t be rushed into decisions.
“We have to do it very carefully,” Ajith Cabraal told Reuters. “The foreign ministry has to give their two cents, the petroleum ministry has to give their two cents, we will have to give our two cents and then we will have to see the whole thing together.”
He said seeking a waiver was one option.
The new law allows Obama to issue waivers to firms that significantly reduce oil imports from Iran, or if a waiver is in the U.S. national interest or necessary for energy market stability. Japan, Turkey and South Korea have already sought waivers.
The Sri Lankan foreign ministry declined to comment.
Sri Lanka’s state-owned Ceylon Petroleum Corporation (CPC) pays for the island’s crude via the largest bank in the country, the state-run Bank of Ceylon, two sources with direct knowledge of the payments said. The central bank declined to comment on crude payments.
The payments are processed through the Tehran-based Asian Clearing Union (ACU), a nine-nation trade clearinghouse set up by the United Nations in 1974 to facilitate trade in South Asia. It allows central banks to settle transactions on behalf of local companies.
However, the ACU has come under increased scrutiny from Washington, which argues it can interfere with its ability to track funds going into Iran.
India’s central bank said late last year that payments to Iran can no longer be settled via the ACU.
LIMITED OPTIONS
Like Indian crude importers, Sri Lanka’s petroleum ministry is looking for other sources, but unlike most other buyers is limited in its options.
China, India and Japan are the biggest importers of Iranian crude, buying between five times and 10 times more barrels than Sri Lanka. But the imports are only a small portion of their overall crude purchases, so it easier for them to mix other crude oils in their feedstock.
The Italian-built Sapugaskanda refinery can process crudes similar to Iranian light, like Abu Dhabi’s Upper Zakum and Saudi Arabia’s Arabian Light.
But in the past, non-Iranian crude has never made up more than 20 percent of the total annually, Premajayantha said.
Underscoring Sri Lanka’s close ties with Tehran, Iran had proposed a $2 billion refinery upgrade, but the plan fell through last year.
Premajayantha said Sri Lanka will continue to import from Iran and is looking at changes to payment modes, following the lead of other Asian nations.
“Even India and China import oil from Iran and still they import and pay. If there is an issue they (Iran) will inform us that this is the mode they are going to introduce,” he said.
Premajayantha is discussing a new supply deal with Oman, two sources with direct knowledge of government negotiations said. The minister declined to confirm the talks.
Sri Lanka is also considering buying Iranian crude through a Middle East intermediary, or possibly via a Chinese company that would then convert the cost of imports to a long-term loan or other financing facility, three officials from the central bank and petroleum ministry said. They spoke on condition of anonymity.
Sri Lanka presently enjoys a four-month credit facility from Iran for crude imports.
“We know how much oil we are importing, we have to see what are the options available to us, examine that and take a call where to pitch our line and then only we will take a decision,” Cabraal, the central bank governor, said.
Source: Reuters
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We all know world facing big problem oil cris currently,so this situation it is better put embargo against oil export country iran?is it good idea every couner IF WE LOOK?
Day by day oil prices are rising everywhere in the world this situation USA try to put against oil export embargo.America and there companys partners went to war iraq because of nuclear and chemical weapans still never found any small meterials also,now same mistake doing against iran.America never face oil problem very seriously because of there galans selling so cheaply,but other rest of world its so hard to face this oil prices.
SUDHANTA SAMARU WELAWATE MULEYAME NEHEE!
Hark Ye All Unpatriotic Elements and Conspirators against the motherland, tune up your bugles and drums ,come in your full nmumber rejoicing and dancing to sing hymns and hosannas in praise of Barak Obama.His sanctions are going to throttle us. Isn’t that wonderful?
The Israeli State is feeling threatened by Iran’s nuclear buildup and is planning a short but deadly attack on Iran with the support of the jewish lobby in the US.
It is Elections year in the US and the incumbent President would love to have block support of the influential jewish lobby.
My research indicates the Mullahs of Iran do not favour the sabre-rattling President any longer and would indirectly welcome his removal.
Poor countries such as SL are meat in the sandwich. It all depends how we play our hand.
If the komis-karayas rule the day and we decide to get Iranian oil through 3rd parties, the oil imports will cost much more than what we now pay.
If we opt for negotiating a waiver from the US Government with a strategy of diversifying our oil supply sources in the medium and long terms, we are likely to be winners.
On Friday, the US State Dept informed the judge hearing the damages case filed filed by an overseas tamil group of affected persons against, MR, BR, GR and PK for damages for unlawful killings, that MR is eligible for immunity as the sitting Head of a State. The Judge will now proceed on the matter against the 3 others who are all citizens of US and Australia.
I write this news to demonstrate US Government’s capability of being impartial in their decisions and judgements in dealing with other nations.
India has stated clearly and loudly they will not abide by any oil embargo against Iran sanctioned by USA unilaterally, as it is illegal without the authority of UNSC.
India too depends on large oil imports from Iran. India and Iranian navies will give safe passage to Indian oil tankers from Iran. Any attempt by USA to block oil imports by India from Iran, through US military/naval superiority will be an act of naked aggression by USA. It will be considered an act of war by India and Iran. Will this confrontation lead to WW3 in the long run? It means Armageddon!
This threat by USA to impose unilateral sanctions against Iran amounts to domination and bullying. It has to be discussed at UNGA and UNSC, and USA denounced by the world body for its foul domination of other nations and war mongering. It has to be declared illegal and Iran allowed by UN to export oil without any sanctions.
Since Israel developed secretly and has large stocks of nuclear bombs and means of delivery against Arab nations, why shouldn’t Iran develop its own nuclear arsenal to counter nuclear threat of Israel? USA support for Israel in developing its nuclear arsenal is unfair. Its support for Israel to prevent Palestine people from attaining sovereignty is totally unfair. This has to be denounced in UNO. Unfortunately, because of US, British and French veto power Palestine is unable to gain sovereign status. Unfortunately, the powerful Jewish lobby in USA is the cause of US support for Israel unfairly, whichever political party comes to power in USA.
Nicholas appears to be advocating the “komis-karaya” approach to the issue. That will be buy Iranian oil through the backdoor (or via India) with huge commissions which will evetually be built into the consumer’s price.
On the arms race, just because the bigotted Israeli’s are stocking nuclear arms, the other peace loving nations need not follow suit.
It is true the Jewish lobby has a stranglehold on Worlwide money trade. However, Gen X, Gen Y and Gen Z are showing signs of intolerance towards domination of any sort. This attitude has given birth to the Worldwide “Occupy Wall Street” movement.
If Obama wins his 2nd term (most likely looking at the pack of opposition jokers attempting nomination) lets keep our fingers crossed on movement in the area of “domination”.
Dear Nelson,
In Blog 4, I have not advocated importing Iranian oil through India or any other country for that matter. My view is that SL continue to import oil DIRECTLY from Iran. Business as usual. We should also continue with our mutual trade relations. No unilateral diktat from world-dominating, bullyboy USA is going to cow us down.
China and Russia have clearly warned USA, its diktat has no legal force, where free trade with Iran is concerned, on their part and on the part of the Freeworld. China has stated it will continue to import oil from Iran. Any effort by USA with its NATO allies to impede this will be considered an ‘act of war’. USA is already flexing its muscles in the Pacific region, which has heightened tension between the two superpowers. Obama may be sabre rattling merely to win the ensuing elections by his false bravado, which is actually sheer stupidity, which I hope will backfire on him. In anycase, whoever comes to power in USA has the same policy of wanting to dominate the world by superior military technology. This superiority is a total hoax, as proven in the fiasco in Vietnam and Afghanistan. USA had to withdraw from Iraq in the face of drastic cuts in its defence budget. It has failed in Iraq too.
China, India, Greece, Italy and Spain imports bulk of their oil from Iran. This status quo will not change. China and Russia has warned USA, without UNSC sanction USA cannot act unilaterally to ban the whole world from trading with Iran. I hope the message sinks to Obama. This man who promised to close Guantanamo Bay torture prison has infact sanctioned it by law through Congress, to keep it open permanently. So much for his election pledge! The human rights abuse and crimes against humanity in this prison alone cries to high heaven! UNHRC is totally silent about it, the very organisation which was so vociferous against tiny SL. Bullyboy tactic again, their palms well oiled by bags of greenbacks from the diaspora Tamil lobby.
Heavy nuclear arsenal of Israel needs to be countered by an equal arsenal of nuclear weapons in Iran, who has the means fo delivery. This is the only way to balance the nuclear threat and prevent both countries from actual use of nuclear weapons, same as the balance between the superpowers of the West on one side and China, Russia and N. Korea on the other side. But at the moment, Israel has no such threat from Iran, hence it flexes its muscles against Iran.
It is utterly shameful that UN has not brought sanctions against Israel for its naked aggression against Palestine and the wanton killing of Palestinians and the destruction of their homes, mosques and infrastructure! It continues to expand to Palestine territory by force, to build more houses for its Jews. Why is it possible for USA to bring sanctions against Iran unilaterally, while UN is doing nothing to sanction Israel against its blatant war crimes and crimes against humanity?
There are two ways in matching up with an arms buildup.
1. To build up a parallell arsenal with equivalent or more capacity
2. To eliminate the 1st buildup
This is a generational issue. The post 2nd World War generation prefers option 1.
Gen X, Y & Z prefer option 2.
The Australians are the latest deviants in the issue of nuclear arms. They have shamelessly consented to supply the Italian Mafia led ‘corrupt to the core’ Government in New Delhi with Uranium. Such deviants should be classified international pariahs. Shame on you, Australia.
Following the depreciation of the rupee by 3% in the budget in 2011 the the value of the rupee tumbled down. The County’s foreign reserves are now being sold as a means of avoiding this situation. Economists point out foreign reserves worth US$600 million have been sold in the six weeks since the budget speech.
The government had been attempting to artificially protect the value of the rupee by selling foreign reserves since September last year and foreign reserves worth US$300 million had been sold during the period.
The main reason for the breakdown of the rupee is the trade deficit in foreign trade. The trade deficit that was 50% in 2010 had risen to 100% at the end of 2011, which means imports had cost double the export income.
The economic strategy followed by the government does not address increased production, increase export income thereby reducing the trade deficit. The government relies on increasing its foreign exchange by increasing the number of tourists to the country and getting more and more people to seek foreign employment.
However, due to the international economic situation people already employed in foreign countries are rapidly losing their jobs. Also, the number of tourists from Europe and other western countries has reduced significantly due to the economic crisis spreading throughout the world and due to adverse security concerns in hotels and lodges.
Coupled to the significant economic downturn, Sri Lanka now faces the threat of a crisis in the supply of fossil fuels.
Nelson Appadurai’s brilliant analysis of the Sri Lankan economy was picked up by Google in a search related to the Sri Lankan economy.
I used his expose’ in delivering my on-line lecture to Uni students in Philadelphia today.
Thank you Nelson; I will be following your writings closely in future as they add immense content value to the subject of Economics in a third world state.
Thank you Professor Shan T.
Has Occupy Wall Street spread to Sri Lanka? Do Sri Lnakans know what it is all about? Recently, the Head of SL’s bourse resigned due politically motivated money market manipulations.
Given below is a brief background on the Occupy Wall Street movement:
Occupy Wall Street is a people-powered movement that began on September 17, 2011 in Liberty Square in Manhattan’s Financial District, and has spread to over 100 cities in the United States and actions in over 1,500 cities globally. OWS is fighting back against the corrosive power of major banks and multinational corporations over the democratic process, and the role of Wall Street in creating an economic collapse that has caused the greatest recession in generations. The movement is inspired by popular uprisings in Egypt and Tunisia, and aims to fight back against the richest 1% of people that are writing the rules of an unfair global economy that is foreclosing on our future.
USA is blatantly supporting Israel in the brutal suppression of Palestinian nation. UN is totally toothless and powerless to stop it. The rich Jewish lobby is USA makes all the moves in USA to maniplate its leaders and even appoint them. The rich Jewish lobby, though small in size, is very powerful in USA. They are the movers and shakers.
Britain, France, Germany are lapdogs of USA to wag their tails and obey US commands. Arab Emirates have joined this evil lot against fellow Arabs/Muslims in Syria and Iran for vested interests.
If Iran becomes also a Nuclear power with a nuclear arsenal, so much the better, as it would be a nuclear DETERRANT against nuclear arsenal of Israel, which was developed clandestinely with US support. Newt Gingrich (the slimy amphibian with ambitions of becoming next US President) is inciting cold-blooded murder of Iranian scientists and intellectuals, especially the nuclear physicists. Already four such scientists in Iran have been assassinated by Israel in collusion with USA. Iran must surely provide better security for its scientists, after this! Israel, USA and senators, like this Newt Gingrich, should be condemned in UNSC and UNGA and some action taken against them. World would be a better and safer place without such evil men and evil countries!
REMOVED
Dear Administrator,
Blog 12, is another example of this man Udurawana’s obscene comments, totally irrelevant. I hope you will block his comments and not tolerate him, to keep this website clean. Thank you.
Sri Lnaka must work towards expanding their capacity to process and refine different varieties of crude oil which have different proportions of constituent chemicals. Otherwise it runs the risk of being at the mercy of geopolitical power-struggles between the nearly bankrupt western alliance and the resurgent East and their allies. The West wants to destroy non-compliant “upstarts” that do not heed its will to dominate and dictate terms regualrly changing the goal-posts in an uneven playing field. While maintaining trade with whichever country that yields good business, (not bribes) Sri Lanka must support the countries that stand up to the bullies and align with progressive countries like China.
Dear Lasantha,
I totally agree with you that we must have oil refineries that can refine crude oil of different compositions chemically, so as not to be at the mercy of US and NATO bullies.
I hope China’s and India’s firm stand against US bullying will help us also. Perhaps our oil from Iran could also be brought in a convoy, protected by Chinese and Indian fleets against US and NATO menace.
How unfortunate that UN is powerlees to denounce USA and the imperial West for their unlilateral sanctions against Iran which is detrimental to the economies of so many smaller nations like ours. I am hoping that the combined strength of superpowers Russia and China will force USA and NATO countries to back down.
Nicholas
Thank god you managed to get rid of the fake. You need to use your charm to bring back to the forum Demala Selvan the well balanced tamil gentleman. NA too appears to bring some fresh breath to this forum.