An offshore oil platform near Lavan island, operated by the National Iranian Offshore Oil Co. Iran was India’s seventh biggest oil supplier in January. Image Credit: Bloomberg

Abu Dhabi: Countries will potentially face serious economic sanctions if they continue to buy oil from Iran as US sanction waivers on purchases of oil from key Opec member kicks in, experts said.

In a major decision last month, the US administration decided to end Iran sanction waivers granted to eight countries that import oil from the Islamic Republic including China, India, South Korea and Japan, among others from May 2 following reimposition of restrictions on the country last year for its nuclear related activities.

“Accessing the global markets in US dollars is the ultimate weapon the US has when it comes to imposing penalties against those who do not comply with the US economic sanction restrictions,” said Doug Davison, sanctions expert and partner at the London based law firm Linklaters in a statement.

“It is possible that the US will seek to restrict access to the US markets for those — non-US companies and individuals — continuing to deal in oil from Iran. At bottom, this could severely impact any country whose economy depends on being able to make or receive payments in US dollars.”

Iran’s biggest oil customers are China and India, both of which have lobbied for an extension to the sanction waivers.

China imported 613,000 barrels of oil per day (bpd) from Iran in March, India imported 258,000 bpd, South Korea 387,000 bpd and Japan 108,000 bpd, according to data compiled by Bloomberg,

Dr Sara Vakhshouri, President of SVB Energy International in Washington told Gulf News Iran might be able to smuggle 150,000 to 200,000 barrels per day of oil under the current sanctions but going beyond this number would be difficult.

“It is very hard to hide oil cargoes at sea. Even if those middlemen that are not concerned about violating US sanctions purchase Iranian oil, no end user would want to process an oil that originated from Iran because of the risks involved and hence this limits Iran’s informal sales or smuggled oil.”

She, however, said Iran has some ongoing oil delivery agreements as part of certain debts to China, and India and the US government might allow such deliveries to continue.

“These are not sales. This could add between 200,000-350,000 barrels per day to what Iran would smuggle. We estimate about 120,000-200,000 barrels per day of debt payments to China and about 100,000-150,000 barrels per day of debt payment deliveries to India.”

Global benchmark Brent and West Texas Intermediate both finished the weekly slightly lower, with Brent closing the week at $70.85 a barrel and WTI finishing at $61.94.

The rise in US production continues to weigh on oil prices despite the ending of Iran sanction waivers.