Sri Lanka to curtail Iranian oil imports; Won’t make payments in US dollars

Iran Oil

Sri Lanka intends to substantially curtail the import of Iranian crude, in line with tough new sanctions imposed by the United States, before the June 28 deadline.

“Our efforts to finalize new arrangements ahead of the deadline were on track,” Petroleum Minister, Susil Premjayantha said yesterday. “In fact, we have no option, but to act swiftly and decisively to ensure an uninterrupted energy supply,” the UPFA General Secretary said in a brief interview with The Island.

Many of the countries that purchase Iranian oil are US allies, including several European countries, India, Japan and South Korea.

The European Union, too, has imposed sanctions as part of the overall US-spearheaded efforts to undermine the Iranian economy, over Teheran’s refusal to suspend its nuclear programme.

The Minister said that all major buyers had been forced to substantially curtail their purchases before the June 28 deadline, or face the consequences.

Minister Premjayantha said that Sri Lanka’s only oil refinery at Sapugaskanda refined 14 tanker loads of crude oil annually. Of them, 13 ship loads were of Iranian origin and the remaining from Saudi Arabia, the parliamentarian said, adding that in line with the US directive, the government now intends to bring down the Iranian supply from 13 tanker loads to 10. Each consignment comprised 135,000 tonnes of crude. Asked whether Sri Lanka would be able to make payments to Iran in US dollars, the minister said that wouldn’t be possible due to the recently imposed sanctions.

“We’ll have to make payments in some other currency. We are working on that in consultation with the Central Bank. At the moment, the issue is how to bridge the shortfall in the supply of crude oil.”

Iranian oil imports at the moment cost Sri Lanka $ 1.6 billion. Due to the US directive that payments to Iran couldn’t be made in dollars, the demand for the US currency was likely to go down, the minister said. In the wake of the depreciation of the Sri Lankan rupee against the US dollar, the US move could be beneficial to Sri Lanka, the minister said in response to a query.

He said that the government would have to reach new agreements with suppliers to obtain three tanker loads amounting to 405,000 tonnes (earlier purchased from Iran). Responding to a query, the Colombo District MP said that Sri Lanka had finalized an agreement with Oman to secure 370,000 tonnes of crude oil and was in the process of exploring the possibility of obtaining the remaining stock from Saudi Arabia.

Premjayantha said that the CPC and CEB together would have to explore every opportunity to reduce oil consumption and encourage both the private and public sectors to help save foreign exchange. He said that the conclusion of the conflict in May 2009 had reduced the needs of the armed forces, thereby making a substantial difference in current requirements.

Asked whether it wouldn’t be cheap to obtain refined products through Singapore, the minister said that as Sapugaskanda met CEB requirements, too, it would be necessary to continue with crude oil imports. Otherwise, the CEB requirement for furnace oil would have to be purchased overseas, whereas it was a byproduct at Sapugaskanda.


Courtesy: The Island