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Govt 'confident' of avoiding US sanctions

Cape Town -  South Africa, which receives a quarter of its crude from Iran, is holding almost daily discussions with the United States, European Union and Iran about reducing its purchases and is "confident" a deal can be struck to avert US sanctions, a senior energy official said on Thursday.

Washington, which with the EU is putting pressure on Iran to end activities they believe may be a front for nuclear weapons research, has threatened to penalise the banks of countries that do not significantly cut oil imports from Iran.

But Africa's biggest economy, which has suffered fuel shortages in the past because of strikes and refinery problems, may struggle to offset any reduction in imports from Iran to secure a waiver from these sanctions.

"Engagements continue, they are continuing probably on a daily basis with all these players and we are, I must say, confident we will find a solution, as the minister indicated, that will work for South Africa," Tseliso Maqubela, a deputy director general at the energy department, told reporters.

Maqubela said there would be a significant economic impact as companies would be forced to secure fuel elsewhere. At least one refinery, Engen, majority-owned by Malaysia's state oil company Petronas, is heavily reliant on Iranian fuel.

Speaking at the same briefing, Energy Minister Dipuo Peters said South Africa was not certain to seek a waiver of sanctions.

"At present we can't say that the waiver is the route that we will ultimately be chasing, but we are looking at a range of options," she said without elaborating.

Some countries, such as South Korea, the world's fifth-largest oil importer, have warned they will find it difficult to replace Iranian supplies, and for South Africa too, there seems no easy option.

"Time is against South Africa, which is essentially being forced into a situation that might not be in its best macroeconomic interests," said Johan Muller, senior energy analyst at Frost and Sullivan.

"There are few alternatives available at this stage, the obvious one being to increase imports of fuel from Angola, Nigeria and Saudi Arabia, but this would require significant re-engineering at certain refineries to accept new supplies.

"In the short term this would likely mean higher fuel prices for consumers and the industry, although this will stabilise in the longer run as alternate sources are found.

"At this point, pursuing a waiver might be the better option, but given the variables and geopolitical negotiations, it is difficult to predict exactly how this will play out."

Peters said the government would decide its response to proposed sanctions by the end of May.

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