by Jamie Crawford
China and Singapore will receive exemptions from U.S. sanctions scheduled to go into effect Thursday that would have cut off banks in those countries from the U.S. financial system for handling Iranian oil transactions, a source in the office of Sen. Robert Menendez (D-N.J.) tells Security Clearance.
Secretary of State Clinton called Senator Menendez earlier today to inform him.
Under legislation signed by President Barack Obama In December, the United States will take action against countries that continue buying large volumes of Iranian oil through Iran's Central Bank by cutting off financial institutions engaged in those transactions from the U.S. banking system.
Menendez, who co-authored legislation with Sen. Mark Kirk, R-Illinois, that targeted transactions of Iranian crude through Iran's central bank was notified of the decision in a call from Secretary of State Hillary Clinton, who is traveling in Europe, according to the source.
Seventeen other countries and Taiwan were offered exemptions from sanctions by the United States, but China, one of the largest purchasers of Iranian crude, had been absent from previous announcements.
"We are actively working this issue. Washington is barely awake," Clinton said earlier Thursday when asked whether China would get an exemption.
"China and Singapore both share our goals of preventing Iran from acquiring a nuclear weapon, and they appreciate that international sanctions and the pressure that these sanctions have brought to bear on the Iranian economy have been a key aspect to our dual-track strategy over the last years, and both countries have announced steps that they have taken already in their own national interest to move on this important matter, and they're continuing to discuss and gather additional data on the implications of those sanctions."
According to the source in Menendez's office, Clinton told the senator that China had met "the benchmark to constitute a significant reduction in purchases" of Iranian oil, as the law called for, in order to be granted an exemption from U.S. sanctions.
While the drop in Chinese purchases is widely thought to be the result of a contract dispute between China and Iran, however, the official says the administration has suggested that China will continue to reduce its purchases of Iranian petroleum over the coming months.
The source says that as of May, Singapore has terminated all imports of Iranian oil and has passed its own law prohibiting all transactions with Iran and the Central Bank.
Update 2:45p – State Department released a statement from Secretary of State Hillary Clinton:
Today I have made the determination that two additional countries, China and Singapore, have significantly reduced their volume of crude oil purchases from Iran. As a result, I will report to the Congress that sanctions pursuant to Section 1245(d)(1) of the National Defense Authorization Act (NDAA) for Fiscal Year 2012 will not apply to their financial institutions for a potentially renewable period of 180 days.
A total of 20 world economies have now qualified for such an exception. Their cumulative actions are a clear demonstration to Iran’s government that Iran’s continued violation of its international nuclear obligations carries an enormous economic cost. According to the International Energy Agency (IEA), Iran’s crude oil exports in 2011 were approximately 2.5 million barrels per day, and have dropped to roughly 1.5 million barrels per day, which in real terms means almost $8 billion in lost revenues every quarter. When the European Union oil embargo goes into effect July 1, Iran’s leaders will understand even more fully the urgency of the choice they face and the unity of the international community.
Today marks an important milestone in the implementation of the NDAA and U.S. sanctions toward Iran. Following the President’s determinations on March 30 and June 11 on the availability of non-Iranian supplies of oil, as of today, any foreign financial institution based in a country that has not received an NDAA exception is subject to U.S. sanctions if it knowingly conducts a significant transaction with the Central Bank of Iran for the sale or purchase of petroleum or petroleum products to or from Iran.
We have been clear all along that there is a path for Iran to fully re-join the global economy. Iran’s leaders have the opportunity to address international concerns by engaging seriously and substantively in negotiations with the P5+1. I urge Iran to demonstrate its willingness to take concrete steps toward resolving the nuclear issue during the expert-level talks scheduled in Istanbul on July 3. Failure to do so will result in continuing pressure and isolation from the international community.