Iran oil: Lanka trapped in US sanctions

Sunday March 04, 2012

By our Diplomatic Editor

Sri Lanka has told Iran it will follow in the steps of India to secure urgently needed oil supplies from theat country if its quest for stocks from other sources fails. At present Iran supplies 93 per cent of Sri Lanka’s crude oil requirements. This in essence is what Central Bank Governor Ajith Nivard Cabraal told Iran’s Central Bank Governor Mahmoud Bahmani during extensive talks in Teheran recently. Mr. Cabraal flew to Teheran for a day’s visit accompanied by an Assistant Director of the Central Bank. This was in the wake of the sanctions imposed on Iran by the United States. The move came after confirmation that Sri Lanka would not receive exemptions from the US. India has publicly declared that it will only heed sanctions of the United Nations and not the United States. Hence, India, one of the largest buyers of Iranian crude has said it will continue its purchases from Iran. However, payments for such procurements are being routed through other sources and not through any US banks. Mr. Cabraal has also explained to Iran the difficulties Sri Lanka encountered as a result of the US sanctions. He has said that it was an extremely difficult situation since breaking the sanctions would mean Sri Lanka will lose the country’s largest apparel market in the United States. He has also said that Sri Lanka was looking for other sources of supply on an urgent basis. Last week’s the Sunday Times report of the US not granting exemption from sanctions to Sri Lanka drew a response from Edward Heartney, Economic Counsellor in the US Embassy in Colombo. He explained, “The United States has been engaged in private discussions on this issue with the Government of Sri Lanka, before and during the February 2 visit of US Treasury Deputy Assistant Secretary Luke Bronin, as well as in subsequent meetings. We will continue to work with the Government of Sri Lanka, and have offered to provide any technical expertise that might be of assistance.” However, he has not explained what this “technical expertise” is. Mr. Heartney has said that the US sanctions has two exemptions. He states: “First, the law exempts exports of food, medicine, and medical devices to Iran, which is significant for Sri Lanka because tea exports are included in the food exemption. Second, if a country significantly reduces its imports of Iranian oil, then the legal provisions cutting off access of that country’s financial institutions to the US financial system are exempted. Under the US law, eligibility for this exemption solely depends on significant reductions in Iranian oil imports, and it is not tied to any human rights issues.” Mr. Heartney added, “there is no tie between sanctions and human rights records, and thus Sri Lanka’s request could not be granted. Iran sanctions law is applicable to all countries, and there are no exceptions based on the amount of oil imported from Iran.” However, other diplomatic sources said yesterday that exemptions have indeed been granted by the US when sanctions are imposed. Rural electricity project hit by US move An Iranian funded rural electrification project in Sri Lanka has run into trouble due to the US sanctions which prevent dealings with Iran’s banks, Power and Energy Minister Champika Ranawaka said yesterday. He said the project aimed at providing electricity to some 1,000 villages had been affected as Sri Lanka could not now deal with the Iranian banks. The minister said Sri Lanka had received US$ 40 million worth of material for the project which was estimated to cost US$ 106 million. But Sri Lanka was not in a position to obtain the balance money and this would be a severe setback to the rural electrification programme, he added.