By Jamie Crawford
China and Singapore received exceptions from U.S. sanctions scheduled to go into effect today that would have cut off banks in those countries from the U.S. financial system for continuing large volumes of Iranian oil transactions, Secretary of State Hillary Clinton said Thursday.
CNN was first to report the exemptions earlier Thursday.
"Today, I have made the determination that two additional countries, China and Singapore, have significantly reduced their volume of crude oil purchases from Iran," Clinton said in a written statement. "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."
The move will keep Chinese and Singaporean banks and financial institutions from being cut off from the U.S. banking system as the legislation calls for those institutions who do not demonstrate a significant reduction in the purchases of Iranian petroleum.
The sanctions effort is largely driven by a determination from the Obama administration that there is enough non-Iranian oil available on the global market to make up for the loss of Iranian petroleum.
On a separate track, the European Union will go ahead with a complete embargo of Iranian oil purchases on July 1.
The sanctions are aimed at pressuring the regime in Iran to agree to limits on its nuclear program. Iran maintains its nuclear program is for peaceful purposes only.
"The Iranian regime's choice here has been to flout its international obligations, but they are paying an increasingly high price for that choice," a senior administration official told reporters in a conference call Thursday. "With these steps today and the steps we are prepared to take going forward, the costs are only going to rise further for Iran."
In the call, the official said the decision to issue the exception to China was made after a statement was posted on a Chinese energy website that showed a 25% reduction in the importation of Iranian crude for the beginning of this year relative to last. There were additional indications that there would continue to be significant reductions of Chinese purchases for the remainder of the year.
The official also noted that China has played an important role in the international discussions with Iran over its nuclear program, as well as the four votes in the U.N. Security Council to impose sanctions on Iran over its nuclear program.
Singapore was granted an exception to the sanctions largely as a result of its decision last month to terminate all imports of Iranian oil going forward.
"With respect to China, Secretary Clinton has assured me that at this time China has met the significant reduction standard required by the law and recent precedent to qualify for an exemption from sanctions," said Sen. Robert Menendez, D-New Jersey and co-author of the legislation on which the sanctions are based, said in a written statement. "The Chinese, however, will have to be mindful that the law requires a significant reduction every 180 days to continue qualifying for an exemption and that we will expect to see additional significant reductions by China and other nations that are continuing to purchase Iranian petroleum or petroleum products in order to qualify for future exemptions."
The announcement was met with calls elsewhere on Capitol Hill for more to be done.
"The administration likes to pat itself on the back for supposedly being strong on Iran sanctions. But actions speak louder than words, and today the administration has granted a free pass to Iran's biggest enabler, China, which purchases more Iranian crude than any other country," said Rep. Ileana Ros-Lehtinen, R-Florida, and chairwoman of the House Foreign Relations Committee, in a written statement.
"If the administration is willing to give China, a country that has aided the Iranian regime's efforts to acquire nuclear capabilities, a free pass, who is it willing to sanction? Congress will once again fill the leadership vacuum created by the administration and work to strengthen sanctions against the regime in Tehran," Ros-Lehtinen said.
According to the International Energy Agency, Iran's crude exports have dropped by roughly a million barrels a day since the sanctions have gone into effect compared with 2011 figures, an almost $8 billion in lost revenues every quarter. Inflation and unemployment are on a rapid rise within Iran, and the value of its currency, the rial, has lost about 45% of its value since November.
China and Singapore now join 18 others that have been granted exceptions from U.S. sanctions.
After Thursday, any foreign financial institutions based in a country that has not been granted an exception from the U.S. government that knowingly conducts a significant transaction for the sale of Iranian petroleum with Iran's central bank will be subject to U.S. sanctions. Because of the ever-changing data in global energy markets, U.S. officials would not name any specific countries that could be affected, but Pakistan and the Philippines are two countries that have been purchasers of Iranian oil that were not granted exceptions.
"We are going to ... be monitoring extremely closely international financial systems throughout the world to ensure that banks ... are complying and to ensure that banks around the world are not doing business with the Central Bank of Iran," a second senior administration official told reporters in the same call. "And you can be sure that if we detect and as we detect violations, we will be swift to act."Photo: CNN