Even With Russian and Iranian Crude Oil Imports Allowed, Domestic Refiners See "No Real Benefit"

Temporary Easing of U.S. Import Sanctions
"Refiners Reluctant Due to Difficult Refining and Sales Restrictions"
Concerns Over Secondary Boycott Persist
Sanctions Lifted, But Immediate Imports Not Feasible

Although the United States has announced that it will temporarily lift import sanctions on Russian and Iranian crude oil, domestic refiners are expressing reluctance. Even if the sanctions are lifted temporarily, this crude oil is difficult to refine and subject to restrictions in terms of sales.

According to the refining industry on March 24, the Ministry of Trade, Industry and Energy and the industry are currently exploring alternatives in response to recent concerns over crude oil supply instability. The Ministry stated in a briefing the previous day, "We are working to secure alternative import sources to replace the Middle East." The Ministry reiterated that Russian and Iranian crude oil products are "cargo already shipped and floating in international waters," and emphasized that it aims to secure new crude oil within a month. Refiners are also each seeking ways to bypass the Strait of Hormuz or to secure crude oil from other regions.

However, within the industry, there is skepticism about whether Russian and Iranian crude oil can actually be imported. The primary concern is the risk of "secondary boycott." Korean refiners generate most of their profits by exporting refined oil to overseas markets, but it may be impossible to find buyers for products made with crude oil from sanctioned countries. A secondary boycott refers to sanctions imposed on third countries that do business with sanctioned nations. Russia has been banned from exporting crude oil due to the war in Ukraine, and Iran has faced similar restrictions since the first Trump Administration. In addition, Russia is subject to sanctions on the international financial settlement network, SWIFT, making the import of Russian crude oil highly impractical, according to industry consensus.

An industry official said, "Russian crude oil has been imported in the past and its quality is not a major issue," but added, "The main problem is the risk associated with sanctions." He explained, "Concerns over a secondary boycott remain, so petroleum products refined from Russian crude oil could face restrictions in the European market, and payment stability issues have not been fully resolved. It is not a situation where crude oil can be brought in immediately just because sanctions have been lifted."

Crude oil from Central and South America raises concerns regarding quality. In the past, a refinery had to be shut down after attempting to process Colombian crude oil. Central and South American crude oil is typically heavy crude with a high proportion of impurities, which does not match the refining facilities of Korean refiners. Most domestic refining facilities are designed for Middle Eastern crude oil. While Middle Eastern crude is not necessarily of higher quality, Korean refiners have built their production facilities to suit Middle Eastern crude because it is relatively stable in supply and less expensive. Once crude oil refining facilities are constructed, it is not easy to change them according to circumstances.

The dilemma for refiners is deepening. An industry official stated, "The suspension of sanctions has made crude oil imports possible, but this is only a temporary measure. The final decision should be made by each refiner, taking into account both economic and diplomatic risks." He also noted, "The reasons for the suspension of Russian and Iranian oil imports were not issues with processing or quality, but rather external factors such as war and sanctions. Even if the government pursues supply diversification, actual imports will depend on individual corporate decisions, and the situation could become even more complicated."

This content was produced with the assistance of AI translation services.