Iran’s Asian Lifeline: Cut off from Western markets, the mullahs are sending their oil eastward.

Related Categories: Islamic Extremism; Terrorism; Iran

The West isn't the only part of the world going to Asia for commerce. Confronted with Western sanctions over its nuclear ambitions, Iran is increasingly turning to Asia's vast markets and its sympathetic governments.

Since the start of the year, as Western countries have weaned themselves off of Iranian oil, Asia has taken center stage in Iran's economic agenda. Today, four countries—China, India, South Korea and Japan—cumulatively buy more than half of Iran's total energy exports, up from just over a third a year ago.

Earlier this year, in response to new penalties on oil purchases from Iran levied by the United States and the European Union, these Asian nations slashed their imports significantly. But today there are signs that they are coming back to the Iranian marketplace.

Far and away the main culprit in this regard is China. After a temporary dip in oil imports earlier this year (as it turns out, largely due to a pricing dispute), Beijing has reportedly resumed being Tehran's largest customer. For July, its imports of Iranian oil were estimated at 587,000 barrels a day—representing 54% of Iran's total exports. China is now importing more than 100,000 barrels a day more from Iran than it did in 2011, according to statistics compiled by the Geneva-based consulting group Petrogistics.

China isn't the only one resuming business with Tehran. Both South Korea and Japan now show worrying signs of backsliding. South Korean refiners and Iran's National Iranian Tanker Company are said to be close to a deal that would allow Seoul to resume oil purchases from the Islamic Republic beginning in late September or early October.

And Japan, long a stalwart ally of Western sanctions, has provided its national refining companies with $7.6 billion in government shipping insurance to ensure the smooth delivery of Iranian crude. Tokyo this month doubled the quantity of oil it is importing from Iran.

Neither is technically circumventing sanctions, since both received waivers from Washington allowing them to continue importing Iranian crude. Still, the trend is not positive.

The bright spot, in comparison, is India. Imports of Iranian oil have dipped significantly, to 10% of total Indian imports today from 16% in 2008-09. More cuts are said to be on the way. Perhaps New Delhi is finally listening to the U.S., with whom it's hoping for a stronger partnership. Also, Delhi is paying Tehran for a large portion of its purchases of Iranian oil in rupees, which is more difficult for the Iranian regime to trade on the international market than dollars.

Cumulatively, these decisions give Iran's fiscal fortunes an unmistakable shot in the arm. In the process, they weaken the impact of Western economic pressure on the Islamic Republic.

Yet so far, U.S. policy has not responded to Iran's shift toward Asia. On the contrary, in many ways, it has encouraged it. The Obama administration's decision earlier this summer to exempt all 20 of Iran's major oil customers from biting new sanctions has sent the unmistakable message to Asian nations that—despite the official bluster emanating out of the White House—it is still possible to do business with both Washington and Tehran simultaneously.

True, the U.S. Congress just agreed to new sanctions that will take additional aim at Iran's energy industry. And once enacted, they will significantly expand penalties on individuals or companies who invest in Iran's oil and natural gas sectors, insure Iranian energy trade, or buy crude from the Islamic Republic.

But Iran's Asian consumers aren't likely to be significantly deterred by these new provisions. If history is any judge, the Obama administration, wary of upsetting economic ties with Beijing and other regional capitals, won't implement them with anything resembling the diligence needed to make a real dent in Iran's Asian market share.

That would be a grave error. To the extent they're implemented, sanctions are already having a pronounced effect on Iran's energy trade. Its oil exports are now estimated at one million barrels per day—the lowest figure in years, and just a fraction of the 2.5 million barrels the Islamic Republic was exporting daily just a few years ago.

But if Asia continues to throw the mullahs a lifeline, the regime won't learn. It follows, then, that for Western sanctions to truly stand a chance of altering Iran's behavior, Asia's economies must be forced to back away from their business with the Islamic Republic.

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