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The Department of Energy is happy to announce that the United States of America has granted South Africa a 180 day exception against the Iran Oil sanctions that are due to commence on 1 July 2012.
The USA imposed sanctions against Iran apply in terms of which financial institutions which continue to transact with the Iranian banks, and in particular, the Islamic Republic of Iran, risk being cut from the USA financial system. The petroleum based sanctions
come into effect on 1July 2012.

The European Union (EU) followed suite by imposing additional sanctions on Iran. Of importance to the South African refining sector, The EU put a ban on the provision of insurance and reinsurance by EU insurers to the State of Iran and Iranian owned companies. Furthermore the EU decided to ban new contracts to import petroleum and
petroleum products from Iran and to end existing contracts by 1 July 2012.

The sanctions impact negatively on the long term sustainability of the South Africa’s refining sector due to increases in both the capital and operational costs to alter the crude diets for the respective refineries.

Given, the impact on the South African refining sector and ultimately the security of supply, South Africa opted to apply for an exception from the USA government. On the 11 June 2012, the USA Secretary of State announced that South Africa, along with countries such as Malaysia, India, Republic of Korea and Sri Lanka has been grated the
exception by the USA. This means that the sanctions will not apply to South African financial institutions which transact with the Islamic Republic of Iran for the fiscal Year 2012. The exception period is 180 days (6 months) and is potentially renewable, provided there has been a significant reduction of the crude oil from Iran during the
period of the exception. It must be noted that this exception is only applies to petroleum based transactions.

However, the EU sanctions against Iran still remain a hurdle. Unlike the USA, the EU legislation does not give provision for any exception. Although the USA granted the exception, the EU sanctions will make it impossible for importation of crude oil from Iran due to the ban on the provision of insurance and reinsurance by EU insurers to the
State of Iran and Iranian owned companies. Government continues to engage with the EU in this regard. Government is currently continuing engagements with other oil rich countries towards securing long term crude oil sustainability of the South Africa refining sector.