Turkey seeks ways to continue trade with Iran amid U.S. sanctions

Ankara and Tehran will seek a bartering system to pass through the U.S. sanctions after Washington announced its decision to end sanction waivers for countries importing Iranian oil, a move could further jeopardize the strained relations between the two NATO allies.

U.S. President Donald Trump has decided not to extend the sanction waivers allowing major importers to continue buying Iran’s oil when they expire in early May, White House said Monday.

The U.S. government re-imposed sanctions on Iranian oil exports in November after Washington pulled out of the 2015 Iran nuclear deal.

Turkey was one of those given a six-month waiver from the unilateral sanctions, which will expire on May 2.

Turkey said it would not accept sanctions on oil imports from Iran and warned that the U.S. move to end exemptions “will not serve regional peace and stability “.

“We do not accept unilateral sanctions and impositions on the issue of how we will establish relations with our neighbors,” said Turkish Foreign Minister Mevlut Cavusoglu on Monday.

He slammed comments by U.S. Secretary of State Mike Pompeo suggesting Saudi Arabia and the United Arab Emirates as alternatives to Iran in oil trade.

“Pushing to buy oil from other countries besides Iran goes too far,” Cavusoglu said, stressing the U.S. move “violates the regulations of the World Trade Organization (WTO).”

Iranian Foreign Minister Javad Zarif paid a visit to Ankara days before the U.S. move to end exemptions and he had discussions with Turkish officials on alternative mechanisms to continue bilateral trade.

Speaking at the joint press conference on April 17, Cavusoglu said Turkey and Iran seek alternative mechanisms, such as the Instrument In Support Of Trade Exchanges, a non-dollar payment channel the EU has set up with Iran, in order to overcome U.S. sanctions and continue bilateral trade in a bid to reach a trade volume of 30 billion U.S. dollars.

Turkey will be negatively influenced in economy and in bilateral relations with Tehran if it ends its import of Iranian oil, as Iran is one of Turkey’s leading suppliers of oil and gas, said Necdet Pamir, energy editor of Sigma Insight Turkey.

“Iran preferred to supply crude oil in more favorable conditions than their competitors, like less barrel price and more appropriate payment, for some countries, including Turkey, in order not to lose its market share,” he said.

Turkey promotes using national currencies in international trade. In October 2017, the Turkish and Iranian central banks formally agreed to trade in their local currencies.

However, Ankara could hardly bypass U.S. sanctions and conduct trade with Iran due to political difficulties it has already been facing in bilateral relations with Washington, Pamir said.

“It will be difficult for Turkey to conduct a sustainable bartering system with Iran,” he said.

The expert recalled Turkey’s dispute with the United States over its decision to purchase Russian S-400 missile systems with fears that a standoff between the two NATO countries could lead to American sanctions which would exacerbate the economy in the country.

Pamir also reminded a court case in New York for Reza Zarrab, a Turkish-Iranian businessman, and Mehmet Hakan Atilla, deputy chief executive of Turkish lender Halkbank, who are being held in the United States on charges of violating sanctions against Iran.

Elaborating on alternative trade mechanisms with Iran to avoid U.S. sanctions, the expert said a new scheme would deteriorate already shaken U.S.-Turkey relations.

Pamir stated that Turkey has already been following a “pragmatic” strategy in line with the U.S. sanctions for its purchase of Iranian oil in the past one year since Washington launched sanctions against Iran, and significantly diminished its import of Iranian oil.

The Turkish government rejects U.S. sanctions in rhetoric for domestic political reasons and for keeping political ties with Tehran, but in fact reduces Iranian crude oil import, he said.

Turkey’s biggest oil importer Tupras has cut back purchases of Iranian crude since last May, even before Washington said it would re-impose sanctions on Tehran, the expert said, noting its imports fell to zero in November.

Turkey used to import about 200,000 barrels per day of Iranian crude before the United States announced in 2018 that it would pull out of the Iran nuclear deal. Reducing oil imports from Iran, Turkey turned to Iraqi crude as a substitute, Pamir said.

As of January 2019, Iran was Turkey’s third-largest source of oil imports with 12.3 percent of the total, following Iraq and Russia.

According to data of the Energy Market Regulatory Authority, Turkey did not import crude oil from Iran in November 2018. In December, it imported 104,000 tons of crude oil, and in January, 381,214 tons of crude oil from its neighbor, falling nearly half from the same month in 2018.

Ankara will continue oil purchases from Iran without violating U.S. sanctions, Turkish presidential spokesman Ibrahim Kalin said last week after his talks in Washington aimed at extending its waiver. Kalin said Turkey has already reduced its purchases of Iranian oil.

In February, Iran’s Minister of Petroleum Bijan Zangeneh said all European countries, except Turkey, have stopped buying Iranian oil since the imposition of U.S. sanctions on the country.