x Abu Dhabi, UAEThursday 18 January 2018

South Korean president on Gulf tour to look for Iran oil alternative

Lee Myung-bak faces pressure from US to cut his country's imports from Iran in line with sanctions imposed for nuclear programme.

BEIJING // South Korea's president is embarking on a foreign tour in which he will swing through a series of Gulf oil suppliers amid growing US pressure for Seoul to reduce imports of Iranian oil.

Lee Myung-bak's trip, which includes stops in Saudi Arabia, Qatar and the UAE, follows a strengthening late last year of US sanctions on Iran amid international concern that Tehran's nuclear programme was aimed at producing weapons.

More than half of Iran's crude oil exports go to Asia and the continent is key to US efforts to put pressure on Tehran, although the response of governments in the area has been mixed.

By reducing the amount of oil they import from Iran, countries such as Japan and South Korea would secure a waiver from a new US law imposing sanctions on financial institutions that trade with Iran's central bank.

Last month, the Chinese premier, Wen Jiabao, visited the same three Gulf states, although analysts said that Beijing, with its fast-growing economy and a publicly stated opposition to sanctions, was unlikely to cut oil imports from Iran.

As a close ally of the US, South Korea may be more likely to heed calls for a cut in imports. Earlier this month, US State Department and Treasury officials were in Seoul to press their case.

However, reports have suggested that refiners in the East Asian nation are set to purchase more Iranian oil this year than last, although Mr Lee's trip may help to ensure that South Korea has alternative supplies available should it be forced to reduce imports from Iran.

About 87 per cent of South Korea's crude oil imports are from the Middle East, with Iranian oil making up about 10 per cent of total imports, and there are concerns that Asia's fourth-largest economy could suffer if it significantly cuts the amount of oil bought from Iran.

"Our economy is very vulnerable to a shortage of oil," said Paik Hak-soon, a senior fellow at the Sejong Institute in Seoul. "We should have more serious negotiations not with Iran, not with other Middle Eastern countries, but with the US government itself, in persuading them not to put too much pressure on us on this issue."

This month, Japan indicated it would cut Iranian oil imports, potentially increasing the pressure on South Korea to follow suit.

China has stated its opposition to Tehran developing nuclear weapons, but has resisted the US-led drive for sanctions.

India has also indicated its intention to circumvent efforts to restrict Iranian oil exports.

South Korea and Japan will soon meet US officials in Washington to ask how much oil they can import from Iran under the new sanctions, Reuters reported yesterday.

Mr Lee's Gulf tour begins in Saudi Arabia on Tuesday, meeting with King Abdullah bin Abdulaziz Al Saud and the defence and oil ministers.

On Thursday, he arrives in Qatar to meet the emir, Sheikh Hamad bin Khalifa Al Thani, before stopping off in Abu Dhabi for discussions with Sheikh Mohammed bin Zayed, the Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces.

The tour comes as international pressure increases on Iran over its nuclear programme.

Inspectors from the UN's atomic agency arrived in the country on Saturday and the EU last week introduced a ban on importing Iranian crude oil. Iran insists its nuclear programme is for peaceful purposes.

Before visiting the Gulf, Mr Lee will arrive in Turkey on Saturday for a four-day visit, and South Korea's Yonhap news agency said the possibility of Ankara asking South Korea to build its four proposed nuclear power plants on the Black Sea Coast is likely to be on the agenda.

Any deal would make Turkey the second nation, after the UAE, to buy nuclear power plants from South Korea, following the signing in late 2009 of a US$20 billion (Dh73.46bn) agreement for South Korea to build four nuclear power stations in Abu Dhabi emirate.

That agreement has been criticised by campaign groups and opposition lawmakers in South Korea over what are seen as unfavourable financial terms for Seoul - the deal portrayed as having been struck to improve South Korea's chance of securing further such overseas contracts, instead of generating a profit in itself.

In Turkey, Mr Lee will meet the president, Abdullah Gul, and the prime minister, Recep Tayyip Erdogan, who at a G20 summit in November said South Korea should play a part in the $20bn Turkish nuclear programme.

Discussions between South Korea and Turkey over a nuclear agreement were held in 2010, although Japan later emerged as the favourite to win the contract before its bid faltered after last year's accident at the Fukushima nuclear plant.