The South Korean petroleum industry is anticipating that President Lee Jae-myung’s commitment to pragmatic diplomacy will significantly enhance flexibility in international oil trade, potentially looking for diplomatic solutions to resume imports of Iranian crude oil.
Liberal Democratic Party candidate Lee won the snap presidential election on June 3 by a substantial margin, defeating conservative candidate Kim Moon-soo by nearly 10 percentage points. He officially assumed office June 4 at 6:21 am local time as the 21st president of South Korea, the world’s fourth-largest crude buyer.
Lee has asserted that diplomacy should prioritize national interests, regardless of the agendas of other superpowers. Throughout his campaign, Lee emphasized the necessity for flexible and pragmatic diplomacy centered on national interests and advocated for a firm response to unreasonable demands from major powers that infringe upon the freedoms of South Korean companies.
Lee’s administration may seek to negotiate exclusive trade arrangements and economic deals, according to political analysts in Seoul, as well as crude procurement and middle distillate marketing managers at major local refiners.
Lee’s administration is widely expected to explore new energy trade and diplomatic options for a nation that relies entirely on imports for its crude oil needs, according to refinery operation managers, feedstock strategists and industry analysts based in Seoul, Ulsan and Seosan. They added that South Korean refiners and the new government will not engage in global trades or deals that violate international sanctions, regulations and laws, and will continue to uphold global humanitarian and social responsibilities.
Following Lee’s electoral victory, finding a diplomatic solution to resume Iranian crude purchases has emerged as a top agenda item for the refining industry’s wish list, according to refinery operation and feedstock management sources.
Historically, South Korea has ranked among Asia’s top three buyers of Iranian crude and was the largest customer of Iranian South Pars condensate before international sanctions were imposed.
“It may be a long shot, but at least Lee’s administration would put in significant effort to enhance the nation’s crude supply security. Iranian crude and condensate used to be [South Korean] refiners’ preferred feedstocks, and it would be great to buy them again,” a linear programming model strategist at a major South Korean refiner said.
While international sanctions must be respected, if the new government can negotiate ways for some South Korean refiners and petrochemical producers to purchase Iran’s South Pars condensate, it could improve refining margins and benefit fuel consumers across Asia with lower prices, according to a feedstock inventory manager at Hanwha TotalEnergies.
Before sanctions, Iran’s South Pars condensate typically traded at a discount of at least $2/b to Qatar’s Deodorized Field Condensate (DFC). Platts, part of S&P Global Commodity Insights, assessed the Iranian ultra-light crude at an average discount of $5.12/b to DFC so far in 2025.
Russian Crude
International sanctions against Russian oil trades and price cap rules must be respected, but the South Korean refining industry remains fully prepared for any changes in the geopolitical landscape that may open the path for the resumption of Sokol, ESPO, and Sakhalin Blend crude purchases, industry sources said.
South Korean refiners have completely shunned Far East Russian crude grades since the second half of 2019, opting to avoid trade, logistical, legal, and financial complications while maintaining a strong corporate reputation. However, geopolitics are typically fluid and subject to rapid changes, with refiners placing high hopes on Lee’s administration to act swiftly on any signals that could reopen avenues for Russian crude procurement.
Far East Russia has always been significant for South Korea, which is Asia’s third-largest crude buyer. It is geographically the closest supply source that could provide 200,000 b/d or more, allowing for substantial cost savings on logistics due to its proximity, according to feedstock managers at two major South Korean refiners.
During the presidential election campaign, Lee presented “national interest-centered pragmatic diplomacy” as the core direction of his foreign and security policy, emphasizing its foundation in a solid South Korea-US alliance.
Regarding both Russia and China, Lee has expressed a strong intention to improve the deteriorated relations with these nations since the Yoon administration. President Lee stated that he would handle the Seoul-Moscow relationship from a national interest-first perspective, contribute to the reconstruction of Ukraine, and pursue pragmatic diplomacy for the security of the Korean Peninsula and South Korean businesses.
Lee also highlighted that China is an important trading partner and a country that influences security on the Korean Peninsula. “We will manage the South Korea-China relationship, which has reached its worst state, in a stable manner.”
Source: Platts