SEOUL - South Korea will soon decide on whether to resume Iranian crude imports after Tehran offered to ship and insure the oil to get around the impact of EU sanctions, two Korean government sources said on Friday.

 

 South Korea, previously among Iran's top five crude buyers, halted imports in July as the EU sanctions stopped companies that dominate global maritime insurance from offering coverage on Iranian shipments.

 

"The South Korean government will not drag its feet, and the decision on importing oil from Iran will be made soon," one of the sources with direct knowledge of the matter told Reuters by phone. The source declined to be identified due to the sensitivity of the matter.

Meanwhile, the Xinhua reported that South Korea was expected to resume oil imports from Iran as early as next month after the South Korean government made a tentative conclusion that it would accept Iran's proposal to supply oil to the Asian nation on its own tankers, local media reported Friday.

 

According to Chosun Ilbo, Iran offered to transport oil to South Korea on its own tankers after the Asian nation stopped oil imports from Iran starting this month. The South Korean government tentatively decided to accept the proposal from the Persian Gulf state following discussion among related ministry officials.

 

"The government is considering accepting Iran's proposal. But, the final decision is not made yet," a government source who declined to be identified told Xinhua.

 

Tehran has offered to provide up to $1 billion of insurance cover to Iranian vessels carrying oil to South Korea, the first source said.

 

Seoul is "considering accepting" Iran's offer, the other source said.

 

A resumption in South Korean imports would be a boon for Iran, as scheduled exports for July have plummeted to about half the levels of a year ago due to the sanctions.

 

Japan, another of Iran's biggest crude buyers in Asia, has provided state guarantees to its insurers to cover imports of Iranian crude. Japanese shippers have yet to lift any Iranian crude in July, but are expected to do so in the last few days of the month.

 

South Korea would prefer not to deploy a scheme similar to Japan's due to the cost, one source said.

 

"A state guarantee like Japan is too costly, although that can be neat," he said.

 

Insurers in Japan, Iran's third-biggest oil buyer, are expanding their maritime coverage to allow domestic tankers to transport Iranian crude.

 

Among other key Asian buyers of Iranian crude, India has given state-run insurers approval to provide limited cover to its ships transporting Iran's oil.

 

If Seoul resumes crude imports from Iran, it would be for end-August or September-lifting cargoes at the earliest, government and industry sources said.

 

Of South Korea's four refiners, only SK Energy and Hyundai Oilbank import Iranian crude. It was not clear yet if they face penalty payments for reneging on their contracts to buy 200,000 barrels per day (bpd) of Iranian oil in 2012, industry sources said, adding they were hoping the halt would be temporary.

 

"We can only discuss with NIOC once the government gives the go-ahead and insurance issues are resolved. We haven't discussed (freight) payments yet," a source at one of the two refiners said, referring to Iran's main oil shipper, the National Iranian Oil Company.

 

 South Korea imported 29.22 million barrels of crude from Iran during the first five months of the year, or about 192,000 barrels per day.

 

South Korea, Asia's fourth-largest economy, has no natural resources and has been scrambling for alternative crude supplies to replace those from Iran, which supplied 9.4 percent of its needs in 2011.

 

South Korea was forced to stop oil imports from Iran starting July as the European Union (EU) banned insurance on Iranian oil shipments. Without insurance from Europe, local shippers cannot carry crude as European insurers are now covering almost all of insurance on cargo from the Persian Gulf nation.

 

Iran planned to provide 1 billion U.S. dollars of sovereign guarantees to its tankers that carry crude heading for South Korea, according to the newspaper.
 

(Source: agencies)