FILE - In this Wednesday, Sept. 27, 2000 file photo, an Iranian oil worker repairs a pipe at an oil refinery in Tehran, Iran. The latest U.S. sanctions to be imposed on Iran have not only unveiled the depth of the country's economic woes, but exposed new fault lines within the government just two months before parliamentary elections that should bolster the control of the ruling clerics. (AP Photo/Vahid Salemi, File)
FILE - In this Wednesday, Sept. 27, 2000 file photo, an Iranian oil worker repairs a pipe at an oil refinery in Tehran, Iran. The latest U.S. sanctions to be imposed on Iran have not only unveiled the depth of the country's economic woes, but exposed new fault lines within the government just two months before parliamentary elections that should bolster the control of the ruling clerics. (AP Photo/Vahid Salemi, File)
BEIJING (AP) ? China, the biggest buyer of Iran's oil, has publicly rejected U.S. sanctions aimed at Tehran's energy industry while American allies Japan and South Korea are scrambling to find a compromise to keep critical supplies flowing.
Beijing is buying less Iranian crude this month, but analysts say China is unlikely to support an oil embargo. Instead, they say, the smaller purchases might be a tactic aimed at obtaining lower prices as the West squeezes Tehran.
The sanctions approved by President Barack Obama on New Year's Eve have highlighted the importance of Iranian oil supplies to East Asia's energy-hungry economies. They have led to a clash of interests between Washington and key commercial and strategic partners over efforts to stop Iran's nuclear program.
"We are considering our response and are closely discussing the matter with the U.S.," a Japanese Foreign Ministry official, Kazuhiro Kawase, said Friday.
A South Korean foreign ministry spokesman said this week Seoul is in talks with Washington aimed at "minimizing the negative impacts" of sanctions. South Korea imports 97 percent of its oil and depends on Iran for up to 10 percent of its supplies.
China's foreign ministry rejected the sanctions this week and called for negotiations, leaving unclear whether Beijing might defy Washington, straining relations between the world's biggest and second-biggest economies.
"Sanctioning is not the correct approach to easing tensions," said a ministry spokesman, Hong Lei. "China opposes the placing of one's domestic law above international law and imposing unilateral sanctions on other countries."
U.S. Treasury Secretary Timothy Geithner is due to visit Beijing and Tokyo next week for talks that officials say will include the sanctions.
China could be the toughest part of Washington's thorny diplomatic challenge as it tries to enforce the sanctions. The fast-growing Chinese economy is the world's biggest energy consumer and imports half its oil.
The sanctions target financial institutions that do business with Iran's central bank by barring them from opening or maintaining correspondent operations in the United States. It would apply to foreign central banks only for transactions that involve the sale or purchase of petroleum or petroleum products.
Japanese and South Korean institutions, with a bigger U.S. presence, would be more exposed to such penalties. But Chinese institutions also do business in the United States and Beijing might see such restrictions as interference in its foreign affairs.
About 11 percent of China's oil imports in 2011 came from Iran, or about 560,000 barrels per day, a flow that increased in the latter half of the year, according to oil industry analysts Argus Media. The daily average for November was 617,000 barrels, close to a third of Iran's total oil exports of 2.2 million barrels a day, Argus said.
Analysts say China would have a tough time replacing that supply.
"China is the biggest buyer of the Iranian oil. How could China stop buying just because of the sanctions?" said Zhu Feng, a Peking University specialist in international relations.
This month, Chinese buyers have reduced daily purchases of Iranian crude, though that apparently stems from price negotiations and a payment dispute that began last year, according to a Singapore-based trader.
The two Chinese state-owned companies that buy Iranian oil reduced purchases by about 5,000 to 15,000 barrels per day, the trader said. He spoke on condition of anonymity because he is not authorized to speak publicly for his company.
It is "within the realm of possibility" that a small reduction in Chinese purchases might be "a shrewd attempt to squeeze the Iranians on pricing," said Victor Shum, an energy analyst for Purvin & Gertz in Singapore.
"As the pressure gets more intense on Iran and Iran wants to ensure its oil revenue, I'm sure Iran will be eager to keep China as a customer and China will be in a good position to negotiate a good price," Shum said.
Iran is China's third-biggest oil supplier after Saudi Arabia and Angola.
The importance of Asian sales makes it unlikely Tehran will make good on threats by some officials to close the Strait of Hormuz, through which Gulf oil flows, said Shum.
That would "really hurt Iran's important customers in Asia ? namely China, Korea and Japan," he said. "No supplier wants to anger its key customers."
Japan is especially dependent on imported oil and natural gas, one-third of it from the Gulf, after shutting down nuclear reactors following last year's tsunami, said Koichiro Tanaka, director of the JIME Center at the Institute of Energy Economics Japan in Tokyo.
Japan's foreign minister will be visiting major oil exporters Saudi Arabia, the United Arab Emirates and Qatar in the next few days on a previously scheduled trip, but Tanaka said it was unclear whether he would get directly involved in trying to line up additional oil supplies.
"There are some thorny issues between the U.S. and Japan, but since we're so dependent on the U.S. forces for our national defense, I don't think we have any other choice but to follow the lead of Washington," Tanaka said.
On Friday, Japan's industry minister acknowledged its dilemma in trying to balance economic and diplomatic demands.
"This is a very important issue that could affect international crude oil prices," Yukio Edano said at a news conference in Tokyo. "The Iranian nuclear issue is also a very important one."
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Associated Press researchers Yu Bing and Zhao Liang in Beijing and writers Alex Kennedy in Singapore and Malcolm Foster in Tokyo contributed to this report.
Associated PressSource: http://hosted2.ap.org/APDEFAULT/cae69a7523db45408eeb2b3a98c0c9c5/Article_2012-01-06-AS-Asia-Iran-Oil/id-be0bbefd66b048bfa2fdcf94cd9782b6
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