Singapore is putting pressure on oil companies operating in the city-state to cut their dealings with Iran as it seeks to be exempted from U.S. sanctions on Iran's oil trade, sources said.
U.S. ally Singapore was absent from a list of countries that Washington this week declared exempt from sanctions after they reduced Iranian oil imports. The sanctions aim to cut the flow of petrodollars that fund Iran's nuclear programme, which the West believes Tehran is using to develop weapons. Iran says it needs reactors to supply electricity.
Singapore is one of the world's biggest oil trading hubs and most of its imports from Iran are of oil products rather than crude. Fuel from Iran is blended, stored, traded and transported from one ship to another by private companies operating on the island and in surrounding waters.
"Singapore is putting pressure on banks and oil companies because it doesn't want to risk U.S. sanctions," a source with direct knowledge of the matter said. "The biggest fear is the impact this will have on Singapore's financial system."
The government has historically kept intervention in oil trade to a minimum, but the sources said it has stepped in to ensure that financial institutions are not cut off from the U.S. system for processing Iran oil transactions after sanctions take effect on June 28.
Singapore is a key Asian financial centre, and would be seriously affected if its banks were targeted by Washington.
Singapore's foreign ministry said on Tuesday the country did not import any Iranian crude last month and was in talks with the United States to obtain an exemption.
Singapore's crude imports from Iran are anyway small, as U.S. energy firms hold stakes in two of the island's three refineries and so are banned under long-standing U.S. sanctions from importing Iranian crude.
International Enterprise (IE) Singapore, the country's trade agency, is leaning on oil trading companies, said sources familiar with IE communications to the oil firms. The IE was not immediately available to comment.
The wording from the IE has strengthened in recent weeks to urge trading firms to stop importing, the sources said. Earlier communication reminded them of the commercial implications of sanctions.
"This time it was different stronger," a Singapore-based oil products trader said.
Fuel oil shipments from Iran to Singapore, the world's top marine fuel hub by volume, have already fallen due to Western sanctions. So far this year, they have dropped to about 309,380 tonnes a month from 532,000 tonnes a month last year, Reuters data show.
Not being on the U.S. waiver list does not mean immediate sanctions. A U.S. official said last week it would take some time for Washington to gather evidence to support punitive measures against banks that have processed oil deals.