SEOUL: South Korea's imports of Iranian crude oil fell nearly 40 per cent in May from a year earlier, reflecting Seoul's efforts to reduce purchases in return for a waiver from US sanctions targeting Iran's controversial nuclear programme.

The world's fourth-largest buyer of Iranian crude oil imported 3.96 million barrels of Iranian crude in May, or 127,880 barrels per day (bpd), compared with its combined term-agreements to import 200,000 bpd this year.

South Korea imported 29.22 million barrels from Iran during the first five months of this year, down almost 16 percent from the same period a year ago, data from the state-run Korea National Oil Corp showed on Monday.

The United States earlier this month extended exemptions from its tough, new sanctions on Iran's oil trade to seven more economies including South Korea.

The north Asian nation could see crude imports from Tehran suspended from July due to a European insurance embargo on Iranian oil shipments.

Of South Korea's four refiners, only SK Energy and Hyundai Oilbank import Iranian crude. Sources said both refiners will stop importing from Iran when the EU insurance embargo takes effect from July 1.

The United States and the European Union accuse Iran of trying to build nuclear weapons. Tehran says the programme is strictly for civilian purposes.

South Korea imported almost 60 per cent more crude from Iran in April than in March, and also 42 per cent more than the same month a year ago, pushing purchases to their highest this year and reversing a decline that began in January.

Some analysts said South Korea was stockpiling crude ahead of the EU shipping insurance ban, which would make it extremely difficult to ship Iranian oil.

South Korea's May import of Iranian crude oil was down 47.3 per cent from April.

OTHER OIL PRODUCERS PLUG GAP

To plug the Iranian supply cuts, South Korea has turned to other Middle Eastern producers, including the world's top exporter Saudi Arabia, the United Arab Emirates (UAE), Kuwait and Qatar.

Shipments from Kuwait in January-May rose 23.3 per cent to 348,493 bpd, while those from Saudi Arabia rose 7.9 per cent to 838,678 bpd, and increased 8.6 per cent from the UAE to 258,263 bpd, the KNOC data showed.

From Qatar, January-May imports rose 14.3 per cent to 280,829 bpd.

Unlike Japan, South Korea is not considering providing sovereign guarantees to insure Iranian oil shipments, according to government sources with direct knowledge of the matter.

South Korea has, however, imposed curbs on exports of goods to Iran to reduce the risks of payment defaults.

Korean exporters usually receive payments via the Iranian central bank's won-denominated accounts where Korean refiners pay for their oil imports.