The United Arab Emirates will give Korea priority in supplying crude oil under circumstances that destabilize Korea’s oil supply.
According to sources, Mohammed bin Zayed Al Nahyan told Korean Prime Minister Kim Hwang-sik that the UAE will give Korea priority in its oil exports if Korea experiences oil supply problems during a meeting in Abu Dhabi on Tuesday.
Kim met the crown prince on the last leg of his 7-day trip of the Middle East, and requested UAE’s cooperation in dealing with the possible oil shortages resulting from developments surrounding Iran.
The U.S. National Defense Authorization Act for this year includes the so-called Kirk-Menendez amendment designed to cut off international transactions with Iran’s central bank. Under the law, economic entities that have transactions with the Iranian central bank are unable to have dealings with U.S.-based financial institutions.
Since September 2010, South Korea’s crude oil trade with Iran has been conducted through Iranian central bank accounts set up with Industrial Bank of Korea and Woori Bank.
As such, Korea has decided to reduce oil imports from Iran, but has been seeking alternative sources as Iranian oil accounts for nearly 10 percent of Korea’s crude imports.
In addition to the UAE, Kim received positive answers from Oman’s Sultan Qaboos bin Said al Said, who said that his country will provide support if Korea experiences oil supply problems.
Although the prime minister’s efforts appear to have secured potential alternatives to Iran, financial losses for local refiners are unlikely to be avoided entirely.
Iranian crude oil costs about $3.1 less per barrel than Kuwait oil, and $5.9 per barrel less than that produced in Saudi Arabia.
As such, SK Innovation and Hyundai Oilbank ― the only two Korean refiners that use Iranian oil ― could see operating costs increased by hundreds of billions of won if they are forced to replace all of their Iranian oil with that from other nations.
By Choi He-suk (
cheesuk@heraldcorp.com)
