Imports of Russian Crude Oil and Naphtha Now Possible... Government Says "Issues Over Financial Settlement and Secondary Sanctions Resolved" [U.S.–Iran War]

The government announced that it has resolved the key obstacles to importing Russian crude oil and petroleum products, namely financial settlement and the risk of secondary sanctions. Concerns over supply disruptions from the Middle East and rising global oil prices had effectively blocked imports of Russian crude oil, and while conditions have now improved to some extent, significant uncertainty still remains before any actual imports can take place.
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On the 25th, Yang Ki-uk, Director-General for Industrial and Resource Security at the Ministry of Trade, Industry and Resources (MOTIR), said at a daily briefing of the "Task Force on the Middle East Situation," "Following consultations conducted by our embassy on the ground and the Ministry of Economy and Finance with the U.S. side, we confirmed that settlement is possible in currencies other than the dollar, such as Renminbi (RMB), Russian ruble, and dirham currency, and that secondary sanctions will not be applied."
Until now, the biggest factors blocking imports of Russian crude oil were financial settlement and the risk of secondary sanctions. U.S. sanctions made dollar-based settlement difficult, and the possibility of secondary sanctions being imposed on transactions led domestic oil refining companies to effectively halt imports.
With this measure, much of the institutional risk is seen as having been resolved. As a result, domestic oil refining companies now appear to be in a position to more actively consider importing Russian crude oil and naphtha.
However, considerable uncertainty still remains before any actual imports occur. Yang explained, "For crude oil, we must comprehensively review issues such as the characteristics of the crude, the reliability of the transaction, and the stability of supply all the way through to final delivery after a contract is signed," adding, "In particular, there is a time constraint in that transactions must be completed within about a month, so the judgment of each oil refining company is crucial."
The volumes currently available on the market are also limited. Yang noted, "The cargoes subject to sanctions relief are restricted to those already at sea, so it is difficult to accurately verify their quality and size," and added, "Industry needs to carefully examine counterpart verification and the feasibility of actually performing the contracts." In this context, naphtha is being discussed as a relatively realistic alternative. He said, "Naphtha appears to have a higher likelihood of being imported than crude oil," and continued, "Oil refining companies will make their decisions by weighing both economic viability and risk."
Meanwhile, the possibility of supply disruptions in Liquefied Natural Gas (LNG) from the State of Qatar is emerging as another variable for the energy market. Regarding reports that the State of Qatar has declared force majeure, the government drew a line by saying it has received no official notification, but it remains highly alert to potential market impacts.
Yang stated, "Even excluding volumes from the State of Qatar, we are preparing so that there will be no major problems with supply and demand through the end of the year," but he also pointed out, "However, there is a possibility that the global gas market will shift from being buyer-driven to seller-driven, which has increased price uncertainty."
Given that the State of Qatar accounts for about 20% of global LNG supply and is a key supplier, analysts say that price volatility could pose a greater risk than the supply disruptions themselves.
aber@fnnews.com Park Ji-young Reporter