Energy always plays an important role in US foreign policy. Some analysts believe if the Trump administration is serious about shaking up U.S. foreign policy, increasing U.S. energy security would be a wise first step. By following a policy of energy security at home and in the American hemisphere, the Trump administration can increase power for itself aboard. One of the Trump administration’s goals from renewed sanctions on the Iranian energy sector is to have an opportunity to help the U.S. energy industry with the imposition of the right policy. Finding a new market for US LNG and US oil may be the aim of US sanction against Iran. The shale gas boom gives an opportunity to the US to turn into one of the World’s leading condensate exporters.
South Korea Energy Imports from Iran
South Korea, as one of the world’s leading technical and engineering services exporters, has a significant financial and credible reputation with Iran, which is pursuing industrial development policies and using advanced technologies and attracting foreign capital. South Korea is one of the major trading partners of Iran, with the balance of trade between the two countries in favor of South Korea. In the course of these events, the two countries have taken the policy of expanding bilateral relations, especially during the last quarter of a century, which have been interrupted by some sanctions against Iran.
Iran’s energy exports to South Korea
South Korea imports 97 percent of its crude oil due to resource constraints; Iran was the largest exporter of oil to South Korea before the sanctions, and South Korea was the largest exporter of automotive equipment to Iran. After sanctions against Iran, South Korea stopped buying oil from the country, and imports from Korea dropped to almost zero. South Korea, the fifth largest oil importer in the world, in November 2018, took a six-month exemption from Washington to continue importing Iranian oil. Korean buyers can import Iran’s most condensate oil at a maximum of 200,000 barrels per day under the Washington exemptions, but must use appropriate methods, including cargo shipment, as well as cargo insurance. Korean banks stopped paying Iran’s oil money on the eve of the start of oil sanctions, but Seoul is still striving to be exempted from Washington’s sanctions against Tehran to receive part of its oil from Iran. South Korea, by far the largest importer of condensate from South Pars, was purchasing 6 million barrels of condensate from Iran in June 2017.
South Korea is one of the main customers of Iranian gas condensate. More than 55 percent of Iran’s gas condensate is exported to the country. According to the official statistics of the Ministry of Oil, the average amount of Iranian gas condensate exports in 2017 was 428 thousand barrels per day. In the first six months of 2018, Hanwha Total Petrochemical, the largest importer of Iranian gas condensate, has imported 15.92 million barrels of gas condensate from Iran, which is a reduction of one third, and imports from Qatar and the United States have increased. In gas production from each phase of South Pars, an average of 40,000 barrels of gas condensate are produced per day. South Korea’s Hanwha Total Petrochemical Company, with the aim of finding an alternative to Iranian oil and gas condensate, has increased the purchase of condensate from the United States and Australia and is seeking to purchase more shipments from Europe. After sanctions Korean refineries and petrochemical companies stopped shipping crude oil and condensate from Iran for the first time in past six years because of fears of US sanctions.
US Oil exports to South Korea
By 2017, the US was the sixth largest supplier of South Korean crude oil, which topped Russia and Iran at that time. The company was also the third largest South Korean LNG supplier, while South Korea was the largest importer of LNG from the United States. South Korea imported at least 18 million barrels of crude oil and 900 thousand tons of natural gas (LNG) from the United States in January and February 2019. The jump in South Korean oil and gas imports by the United States continues to curb trade deficits with major United States trading partners by selling them more. Oil and LNG exports are a key part of this strategy.
By 2018 the US had doubled its oil exports and was exporting 2 million bpd of crude oil to 42 destinations. The volume of exports to destinations throughout the year changed significantly, with US exports of crude to China dropping compared to other destinations, such as South Korea, Taiwan and Canada. In 2018, Asia was the largest regional destination of US crude exports, followed by Europe, while, as in previous years, Canada was the largest destination for the United States crude oil exports overall. Canada received 378,000 bpd of US crude exports, accounting for 19% of total US crude exports in 2018. South Korea surpassed China to be the second-largest destination for US crude oil exports in 2018, gaining 236,000 barrels a day compared to 228,000 barrels a day in China.
The United States uses energy exports, especially LNG, to expand its relations with its neighbors and allies everywhere in the world. The energy security of the European Union and its strong dependence on Russian gas have led the United States to have a special look at the energy market of the European Union, and with the increase in LNG exports along with the acceleration of the construction of the Southern Corridor, their gas need will require the Union to depend on Russia. Slowly the East Asian market, especially South Korea and Japan, which imports the majority of gas condensate from Iran, is becoming a good opportunity for LNG to play a role in South Korea’s energy security.
Trump’s decision to withdraw the United States from JCPOA has not taken place without considering the opportunity to export more energy resources. US LNG exports have always been the concern of the Trump government, while sanctions may once again reduce Iran’s oil exports by 1 million barrels per day, the US oil and gas sector is unlikely to take on Iran’s share of the market. The subsequent sanctions on Iran’s energy industry have not only reduced Iran’s oil and gas production capacity, but also reduced Iran’s share of the global energy market. The rising risk of investment in the Iranian oil and gas industry is another result of US sanction. Reducing oil production capacity and, consequently, reducing Iran’s oil export potential will force Iran to find loans and facilities from banks and global financial institutions.
That the US exports more oil and LNG to South Korea is not a good point for Iran’s future energy exports to South Korea. If South Korean refineries give themselves to US crude oil, this would mean that Iran would have difficulty recapturing its share of the Korean energy market after sanctions are lifted. Iran will not be able to increase production and increase oil exports without foreign investment and technology. Decrease in foreign exchange earnings will directly affect Iran’s economic situation. Considering developments in the energy market and US sanctions, attracting foreign investment and technology will be harder for the Iranian energy industry. Achieving the objectives of the sixth plan of development is possible only with foreign investment, which requires a reduction of political risk in the country, by reviewing foreign policy and providing other necessary conditions for foreign companies, especially Russian and Chinese companies, to invest capital in Iran. A change of attitude in foreign policy and an attempt to eliminate tension with neighboring countries can be a step toward attracting foreign investors.