As from July 1, South Africa will be in breach of US law and will face financial sanctions because of its continued oil imports from Iran.
As things currently stand, the government can do very little, or nothing about it.
If South Africa continues to pay for the oil it receives from Iran (more than 26% of its supply of foreign crude), it will be paying, as it does currently, the money into the Central Bank of Iran, which the US law deems a terrorist agency.
In terms of a new American law, all oil transactions with Iran that pass through the US financial system will be blocked, including those by South Africa and at least 12 other nations, including India and China.
The US government is insisting that all nations, even some of its main allies who share the International Atomic Energy Agency belief that Iran is producing nuclear weapons, “significantly reduce” their oil imports from Iran and in so doing cut off that nation’s main source of revenue.
Japan and 10 European Union nations have done so and have qualified for exemptions of 180 days after July 1.
South Africa, as far as can be determined, has not done so, nor has it indicated its intention to do so – neither can it “significantly reduce” its imports from Iran because of a lack of adequate access to alternative sources.
Much of South Africa’s refinery industry, Engen in particular, is geared to refining Iranian oil because of its unique chemical composition. The entire refinery will have to be re-engineered if it was to switch suppliers.
Engen declined to comment.
Avhapfani Tshifularo, executive director at the South African Petroleum Industry Association, said: “This is not a business decision for us. It involves a political decision about political pressure.”
He added: “We expect a Cabinet decision by the end of the month, and we will allow ourselves to be guided by that.”
Tshifularo said that it was “simply not possible to just switch suppliers. It will take a lot of time and money.”
The department of energy confirmed that Cabinet will deal with this issue at the end of this month, with four weeks before the deadline. Of South Africa’s major oil companies, only Sasol [JSE:SOL] has stopped its oil imports from Iran.
Said Sasol spokesperson Jacqui O’Sullivan: “Until recently, Sasol Oil has procured a relatively small volume of Iranian crude oil, around 12 000 barrels per day. This volume represents roughly 20% of Sasol’s crude requirement for processing at its Natref refinery.”
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