Bloomberg News

Iran Sanctions Hitting Turkish Economy, Energy Costs

April 17, 2012

Turkey’s exports to Iran have fallen 20 percent this year and the cost of imported oil has soared after sanctions on Iran over its nuclear program, Turkey’s Economy Minister Zafer Caglayan said.

The economic cost “is borne by Turkey,” not just by Iran, Caglayan told reporters today in Washington, when asked whether sanctions on Iran’s trade are the best way to rein in the nuclear ambitions of Turkey’s eastern neighbor. “Other countries pay the price of sanctions, too.”

The price of oil has risen as efforts to restrict Iran’s oil exports have fueled global insecurity over energy supplies. Turkey paid $54 billion for energy imports last year, a 40 percent increase over 2010, he said.

Oil climbed to a two-week high today in New York as the International Monetary Fund bolstered its global growth forecast. Crude oil for May delivery advanced $1.42, or 1.4 percent, to $104.35 a barrel at 1:13 p.m. on the New York Mercantile Exchange. Crude is up 5.8 percent this year.

The U.S., European allies and Israel accuse Iran of seeking a nuclear weapons capability. The U.S. and EU have imposed penalties restricting trade with Iran since last November in an effort to pressure Iran’s leaders to give up illicit aspects of their nuclear program.

Iran, which says its program is for civilian energy and medical research, met representatives from the U.S., EU, China and Russia on April 14 in Istanbul in an effort to restart stalled negotiations, and agreed to meet again in Baghdad next month.

Respecting Sanctions

Turkey was the sixth-largest importer of Iranian crude during the first half of 2011, buying 182,000 barrels a day, according to the U.S. Energy Department. In that period, Turkey accounted for 7 percent of Iran’s oil exports, according to the U.S. data.

The five biggest importers were China, Japan, India, South Korea and Italy. Iran is the second-biggest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia.

Caglayan said Turkey isn’t bound by unilateral U.S. sanctions in the same way it must abide by United Nations sanctions. He and Namik Tan, the Turkish Ambassador to Washington, said Turkey nonetheless has decided to cut its oil imports from Iran by 20 percent this year in response to U.S. sanctions.

Under a U.S. law enacted Dec. 31, Iran’s oil buyers have until June 28 to assure the State Department that they will “significantly reduce” their dependence on Iranian imports. The U.S. granted 11 exemptions last month to Japan and EU countries for having promised reductions.

If Turkey or any other country fails to qualify for an exemption, that nation’s financial institutions that process oil deals with Iran’s central bank would be cut off from the U.S. banking system.

To contact the reporter on this story: Indira A.R. Lakshmanan in Washington at ilakshmanan@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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