The US has broadly agreed to grant India a waiver from Iran sanctions after the Indian side chose to cut oil imports from Tehran by about a third in 2018-19, sources familiar with the matter said, adding that an official announcement could be made over the next few days.
Under U.S. law, Washington can sanction the financial institutions of foreign countries that fail to significantly reduce their purchases of Iranian oil and petroleum products.
The Bloomberg report however states that the waivers are temporary and the U.S. "expects" countries that are getting waivers to keep cutting Iranian imports in the coming months.
A list of all countries getting waivers was expected to be released officially on Monday, Bloomberg said. After the latest round of United States sanctions was announced, HPCL was the first Indian refiner to halt purchases from Iran after its insurer backed out.
The sanctions bring back the punitive measures that were imposed and then lifted by former president Barack Obama who reached an global agreement under which Iran moved to end its nuclear program.
Iran and the European Union announced their defiance towards U.S. President Donald Trump's administration after high-level talks at the United Nations in September.
Iran began selling crude oil to private companies for export on Sunday, part of a strategy to counter the planned sanctions. Iran supplied 18.4 million tonnes of crude oil between April 2017 and January 2018 (first 10 months of fiscal 2017-18).
Iran said on Friday the report on waivers showed that the market needed the country's crude.
A waiver will come as a big relief to Indian Oil and MRPL, the two largest Iranian oil consumers.
Oil prices LCOc1 rallied this year to a four-year high above $85 per barrel on fears Washington may want to cut Iranian oil exports to zero.
On Friday, Brent futures LCOc1 traded flat at around $73, having fallen 12 percent since the beginning of October.
In addition to Japan, India, and South Korea, the U.S. would grant the oil waiver to China as well, two people familiar with Washington-Beijing discussions said on the condition of anonymity.
"We think Trump will agree to China importing some volumes, similar to the treatment that India and South Korea receive", Clayton Allen of Height Securities said in a note on Friday.
However, the waivers seem to be making the sanctions totally irrelevant, as the countries receiving them account for a lion's share of the oil Iran exports.
However, he said, he had not received written notification regarding the possible exemption.
Analysts said, however, that Iranian oil sanction waivers would likely only be temporary.
The Indian side, while building its case for a waiver, assured the United States that this payment mechanism ensures Iran can't use oil money from India for any terror-related activity, a key American concern.
Among other countries closely connected to Iran's energy system is Iraq, which imports gas via a pipeline.
Russian Federation has been planning to import oil from Tehran but no major projects have materialized.