Seoul (Platts)--12Dec2012/519 am EST/1019 GMT

South Korea plans to keep crude import volumes from Iran lower than usual in 2013 to win continued exemption from US sanctions, but the government has not yet decided on next year's import levels, a senior energy ministry official told Platts Wednesday.

"South Korea will maintain a reduced level of imports to be able to get a waiver from the US financial system [sanctions], and yes, this is in line with US sanctions on Iran. But we have not fixed a level yet," said the official from South Korea's Ministry of Knowledge Economy, which is responsible for the energy, industry and commerce sectors.

"The government will keep joining international efforts to resolve the Iranian nuclear issue peacefully as a responsible member of the international community," said the official who declined to be named.

South Korea's sole buyers of Iranian crude -- refiners SK Innovation and Hyundai Oilbank -- also refused to comment Wednesday on their Iranian oil import plans for next year.

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Over January-October this year, South Korea's crude imports from Iran slid 38.6% year on year to 45.55 million barrels, according to data from state-run Korea National Oil Corp. The country did not import Iranian crude for nearly three months to September due to a European Union ban on the provision of EU-linked insurance cover for any vessels carrying oil from the Middle East country.

The fall in South Korea's crude import volumes from Iran occurred despite a 1.6% year-on-year rise in the country's total crude import volumes of 785.87 billion barrels over January-October -- as the Asian country imported more crude from other Middle Eastern nations.

South Korea, the world's fifth-largest crude importer, is vulnerable to price increases because it imports almost all of its crude requirements.

SK Innovation and Hyundai Heavy Oil were able to resume imports from Iran from October as the National Iranian Oil Company had offered to deliver oil on Iranian tankers and provide insurance cover for the shipments.

South Korea won a 180-day exemption from US financial sanctions in June, after it pledged to reduce oil imports from Iran. Earlier this month, the Obama administration extended the waiver for another six months until early June next year.

To have the waiver extended for a further 180 days, South Korea is expected to maintain its reduced level of Iran oil imports over the next six months, said the energy ministry official.

The US has not defined -- publicly, at least -- baselines for the cuts. This has resulted in some speculation about the time periods against which volume comparisons should be made. It also gives Washington a great deal of flexibility in deciding whether a country should be granted a further exemption from the sanctions. What US officials have made clear, though, is that a country seeking a further 180-day exemption from financial sanctions must reduce further its purchases of Iranian oil.

Western powers established sanctions against Iranian interests due to concerns it is developing a nuclear weapons program, but Iran has maintained that its nuclear program is aimed at electric power generation.

The US sanctions can effectively prevent South Korea from purchasing Iranian crude as they bar the banks of countries continuing to deal with Iran's central bank from the US financial system. The South Korean economy is heavily dependent on the US.

Furthermore, close cooperation with the US is crucial for South Korea to address North Korea's nuclear and missile development programs. North Korea launched a long-range rocket on Wednesday morning, which critics condemned as a disguised ballistic missile test. The launch, which has magnified the threat posed by the nuclear-armed state, provoked swift condemnation from the US and other countries.

The US has tens of thousands of troops stationed in South Korea as a deterrent against North Korea under a mutual defense treaty signed just after 1950-53 the Korean War.

--Charles Lee, newsdesk@platts.com
--Edited by Deepa Vijiyasingam, deepa_vijiyasingam@platts.com

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