Big oil buyers cut back one-third.

Newly published official data show that China, Japan and South Korea collectively bought 30 percent less crude from Iran in the first quarter of 2012 than in the first quarter of 2011, a huge decline.

It was the first concrete data showing the extent of the cuts from three major buyers. Together, those three countries bought almost half of all of Iran's crude exports in the first quarter of last year.

In Iran, the Oil Ministry issued a statement denying there had been any cutback in its sales to any of those countries. The censors presumably ordered that the statistics not be published in Iran, as the figures could not be found in the Iranian media.

Last week the spokesman for the National Iranian Oil Co. (NIOC) stated flatly that China was buying 500,000 barrels a day of Iranian crude. Three days later, the official Chinese customs data showed Chinese purchases at 346,000 barrels a day in the first quarter.

The next day, Mohsen Qamsari, the NIOC director for international affairs, told Shana, the Oil Ministry news service, that sales to China had not declined but actually gone up compared to 2011. Asked why "some" published reports showed a decline in Chinese purchases, Qamsari said, "Chinese refineries take some political issues into consideration."

Surprisingly, the biggest cutback of the three--measured in both barrels and percentage--came from China, which reduced its buy by 33 percent. What isn't clear is whether cuts of that size will continue.

Many believe China is playing hardball with Iran, cutting back its purchases in order to extract better terms from Iran. If so, Iran has not budged thus far. China has publicly denounced the US sanctions on Iran and loudly proclaimed it will not abide by them. As a result, many think Beijing is playing a game--selling itself to its own people and the Third World as an independent player while at the same time trying to show goodwill to Washington by helping it put economic pressure on Iran.

[GRAPHIC OMITTED]

There is no way of knowing what is true at this point. Everyone will just have to keep watching China's published customs data to see whether crude purchases from Iran go up or down in the coming months.

Japan, which had been talking about cutting Iran buys on the order of 15 to 20 percent actually reduced purchases 31 percent from first quarter to first quarter. Those cuts are expected to be permanent. And, in fact, Japan may buy even less Iranian crude in the coming months.

South Korea reduced its purchases by 22 percent. Despite being politically and militarily dependent on the United States because of its frictions with North Korea, Seoul has been dragging its feet on curtailing purchases of Iranian crude. Reuters quoted industry sources as saying that SK Energy, the country's largest oil importer, hasn't decided what to do, while Hyundai Oilbank, the second biggest importer, has decided to stop buying any Iranian oil as of June.

The real crunch will come in July. As of July 1, the EU sanctions will prohibit any European firm from insuring or reinsuring tankers carrying oil from Iran. There is lots of marine insurance available in Asia, but just about every Asian firm re-insures with a European firm.

The main Japanese insurer announced last month that in the absence of re-insurance it will only insure supertankers and their loads of Iranian oil for $8 million, a mere pittance compared to the normal $2 billion in insurance. (That huge number is because the insurance also pays for the cost of cleaning up if a tanker accident spills crude all over a beach.)

India's four state-owned insurers said they would provide $50 million in coverage for each Indian-owned tanker with Iranian crude.

Chinese insurers have been silent. News reports say they are talking to their government and presumably seeking state underwriting since they cannot go to Europe after July 1 for re-insurance. Zhang Shouguo, secretary general of the China Shipowners Association, told Reuters last week, "[Ship] operators are worried that if the insurance issue cannot be resolved, they will not be able to take orders for shipping Iranian oil any longer."

Japanese tanker owners have been silent. It is difficult to believe they would risk a billion-dollar oil spill with $8 million in coverage. Some think the silence is because they are working like crazy to line up shipments from other oil producers. It is not in their business interest to talk until they have signed contracts.

Meanwhile, production estimates from Reuters show OPEC crude output at the highest level since September 2008, 31.75 million barrels a day in April, even while Iranian production plummeted to 3.14 million barrels a day, the lowest since 1990 when Iran was starting to build output back up after the war. Reuters said extra crude output from Iraq and Saudi Arabia far exceeded the drop-off in Iranian production.

Iraq was able to boost exports when it opened a new offshore terminal in the Persian Gulf. Its exports by that route had been limited by wartime damage to its two old offshore terminals.