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U.S. to Stop Exempting Major Buyers of Iranian Oil From Biting Sanctions U.S. Moves to Stop All Nations From Buying Iranian Oil
(about 3 hours later)
The Trump administration moved to increase economic sanctions on Iran by announcing Monday that it would stop allowing five large nations to buy Iranian oil. Oil prices rose earlier in anticipation of the announcement, and oil and gasoline prices could continue to surge. The Trump administration moved to broaden Iran’s economic isolation on Monday by announcing it would fully enforce sanctions that were imposed last fall and stop allowing five large nations to buy Iranian oil. Global oil prices rose even before the announcement in Washington, increasing the specter of a surge in oil and gasoline prices.
Secretary of State Mike Pompeo said the United States would no longer grant oil waivers to China and India, Iran’s two largest customers. The decision would also stop Japan, South Korea and Turkey, all American allies or partners, from avoiding major sanctions against Iranian oil exports that were imposed by the United States last November. Secretary of State Mike Pompeo said the United States would no longer grant oil waivers to China and India, Iran’s two largest customers. The decision would also end waivers for Japan, South Korea and Turkey, all American allies or partners.
The waivers had allowed the five nations to avoid major sanctions against Iranian oil exports that were imposed by the United States last November. Those exceptions will expire on May 2, clearing the way for American economic penalties against all companies or financial institutions that continue to take part in transactions linked to buying Iranian oil.
“We will no longer grant exemptions,” Mr. Pompeo said in Washington. “We’re going to zero. We’re going to zero across the board.”“We will no longer grant exemptions,” Mr. Pompeo said in Washington. “We’re going to zero. We’re going to zero across the board.”
American officials plan to impose economic penalties on any companies or financial institutions that continue to take part in transactions linked to buying Iranian oil. “Any action or entity interacting with Iran should do its due diligence and act with caution,” Mr. Pompeo said. “Any action or entity interacting with Iran should do its due diligence and act with caution,” Mr. Pompeo said. He estimated that Iran was earning about $50 billion per year from oil sales, accounting for as much as 40 percent of the government’s revenues.
Ahead of his announcement, global crude prices rose 3 percent early Monday morning in Asia. Brent crude futures climbed to more than $74 a barrel, the highest level since October. Global crude prices rose 3 percent early Monday morning in Asia, and Brent crude futures climbed to more than $74 a barrel.
The move to choke off all exports of Iranian oil is part of an increasingly aggressive pressure campaign by the Trump administration to starve Iran of revenue with the goals of forcing political change among its ruling clerics and getting it to rein in its military actions across the Middle East. With the 2020 elections and the summertime surge in energy use drawing closer, President Trump has railed on Twitter against higher gasoline prices that have resulted from rising oil prices. Since the year’s start, world oil prices have risen roughly $20 a barrel, as Saudi Arabia and Russia have curbed production. The prices are now at their highest level in six months.
But the decision also risks increasing frictions with other nations, including some major American allies, and hindering other policy priorities, particularly trade talks with China and cooperation from Beijing on containing North Korea. The clampdown on exports also risks exacerbating tensions with the five nations and hindering other administration policy priorities. The United States is engaged in intense trade talks with China to try to end a trade war that Mr. Trump started last year. And it is working with China, South Korea and Japan on a policy for dealing with North Korea, which, unlike Iran, has a growing nuclear arsenal.
Since May 2018, when President Trump withdrew from a nuclear deal that the United States and other major world powers reached with Iran in 2015, the Trump administration has relied on economic sanctions as the core tactic of its campaign. By increasing sanctions, senior American officials are aiming to weaken the power of the ruling clerics in Iran and force major political change on the country. Since last year, Mr. Pompeo has cited a list of 12 actions he wants to see Iran take before easing sanctions, including ending its support for militias in the Middle East.
In November, when the Trump administration announced major sanctions against Iran, it granted waivers to eight governments allowing them to continue purchasing oil from the country. The governments were supposed to gradually decrease the amount of oil they were buying and bring their oil imports from Iran to zero. Three of those — Taiwan, Italy and Greece — never used their waivers and have ended Iranian oil imports. The New York Times reported last month that the American sanctions have forced Iranian-backed militias to tighten their payrolls. “We have watched Iran have diminished power as a result of our campaign,” Mr. Pompeo said on Monday.
Iran’s two largest customers, China and India, have continued buying oil under the waivers, as have three American allies or partners: South Korea, Japan and Turkey. Just last week, a senior adviser to President Recep Tayyip Erdogan of Turkey, Ibrahim Kalin, told reporters in Washington that the Turkish government expected the United States to continue giving Turkey a waiver. The further cutoff of oil revenue is expected to make life harder for people in Iran, which already is beset by a critical medicine shortage. European nations have opposed the Trump administration’s pressure campaign against Tehran and have set up a transaction entity known as a special purpose vehicle to try to do some business with Iran, though that is not expected to include oil purchases.
Mr. Pompeo said the United States has been in “constant discussions with allies and partners” to find an alternative source of oil. American officials have also spoken to counterparts in Saudi Arabia and the United Arab Emirates about increasing oil production, and officials in those nations “have assured us they will ensure an appropriate supply for the markets,” he said.
A decline in Iranian supplies will be made up by increased oil from Saudi Arabia, the United Arab Emirates, Russia and the United States, said Sadad Ibrahim al-Husseini, former executive vice president of Saudi Aramco. Khalid Al-Falih, the Saudi energy minister, said the kingdom would provide support to global oil markets to avert any shortages.
“Saudi Arabia will coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance,” Mr. Falih said.
Nevertheless, the global oil market will almost certainly tighten, especially with American sanctions on Venezuela and fighting escalating in Libya. Both nations are major oil producers and suppliers to the countries that traditionally have also relied on Iran.
China is by far Iran’s biggest market, importing 500,000 barrels a day of Iranian crude, and Beijing has repeatedly objected to American sanctions.
Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former energy adviser to President Barack Obama, said that he doubted China would stop importing Iranian oil — and that will produce awkward choices for the administration.
“Iran sanctions are going to be a big challenge for the U.S.-Chinese relationship,” he said. “Chinese imports from Iran have been going up this year, not down. Within the next couple of months, if they are not at zero, the law requires that the U.S. sanction financial institutions in China that facilitate those transactions, and right now that includes the People’s Bank of China.”
Turkish leaders are certain to be upset by the announcement. Last week, Ibrahim Kalin, a senior adviser to the president of Turkey, pressed officials in Washington to extend a waiver to Turkey.
“In terms of oil, Iran is one of our main oil suppliers, and we made it clear that not only would we like to continue to buy oil from Iran, but also Iran is a neighboring country,” Mr. Kalin told journalists after those discussions. “We have a long border with Iran, we have cultural ties.”
Since last May, when Mr. Trump withdrew from a nuclear deal that the United States and other world powers reached with Iran in 2015, the Trump administration has relied on economic sanctions as the core tactic of its campaign against Tehran.
The waivers were granted to eight nations with the understanding that they were supposed to gradually decrease their oil purchases from Iran to zero. Three of the eight countries — Taiwan, Italy and Greece — never used their waivers and have ended Iranian oil imports.
Iran currently exports roughly a million barrels a day, approximately 1 percent of world supplies. India, South Korea and Japan, all major buyers, have been warehousing oil and weaning themselves off Iranian oil. Over the last six months of waivers, they have also found alternative sources of oil, including from Africa and the United States.
Iran may try to evade the sanctions by smuggling oil overland, including through Iraq, and shipping through the Strait of Hormuz.
Iran threatened to close the strategic waterway, through which Persian Gulf oil transits to Asia, if it is blockaded by the United States. “In the event of any threats, we will not have the slightest hesitation to protect and defend Iran’s waterway,” said Alireza Tangsiri, head of the Revolutionary Guard naval force, according to state media.
The question of whether to continue the waivers had generated intense debate in Washington in recent weeks. John R. Bolton, the national security adviser, strongly advocated discontinuing the waivers, while Mr. Pompeo had been advised by some State Department officials to continue them.
Republican senators — led by the delegation from Texas, the center of the American oil industry — have urged Mr. Trump to end the waivers.
Saudi Arabia, which is Iran’s main rival, had expected the Trump administration to impose maximum sanctions against Iran and was disappointed by the waivers. The kingdom had ramped up its own oil production in anticipation of the Iranian oil going off the market.
But Saudi Arabia has welcomed the rise in global oil prices that finances the kingdom’s budget and may attract international investors to its proposed initial public offering of Saudi Aramco, which has been delayed over the last year. Saudi Arabia will need to consult with its partners in the Organization of Petroleum Exporting States and with Russia before turning up the taps significantly. That could take a few months.
Russia is also able to deliver more supplies. President Vladimir V. Putin of Russia said last week that he was satisfied with the rise in prices, and that it was premature to reconsider production levels for the second half of the year.
The Trump administration enacted increasingly tough measures against Iran, even over the objections of some of its own officials.
On April 8, the administration designated as a foreign terrorist organization the Islamic Revolutionary Guard Corps, a powerful unit in the Iranian military. It was the first time the United States had applied that label to part of another nation’s government. Top Pentagon and C.I.A. officials opposed the move, saying it could place American troops and intelligence officers at greater risk of reprisals.