US to end sanctions exemptions for major Iranian oil importers


File photo showing Iranian oil tanker docked at the oil facility in the Khark Island (12 March 2017)Image copyright
AFP

Image caption

The sanctions on Iran’s oil industry have led to a sharp downturn in the country’s economy

US President Donald Trump has decided to end exemptions from sanctions for countries still buying oil from Iran.

The White House said waivers for China, India, Japan, South Korea and Turkey would expire in early May, after which they could face economic penalties.

This decision is intended to bring Iran’s oil exports to zero, denying the government its main source of revenue.

Mr Trump reinstated the sanctions last year after abandoning a nuclear deal between Iran and six world powers.

Under the 2015 accord, Iran agreed to limit its sensitive nuclear activities and allow in international inspectors in return for sanctions relief.

The Trump administration hopes to compel Iran to negotiate a “new deal” that would cover not only its nuclear activities, but also its ballistic missile programme and what officials call its “malign behaviour” across the Middle East.

US officials have insisted they are not seeking “regime change”.

The sanctions have led to a sharp downturn in Iran’s economy, pushing the value of its currency to record lows, quadrupling its annual inflation rate, driving away foreign investors, and triggering protests.

In November, the US reimposed sanctions on Iran’s energy, ship building, shipping, and banking sectors, which officials called “the core areas” of its economy.

However, six-month waivers from economic penalties were granted to the eight main buyers of Iranian crude – China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece – to give them time to find alternative sources and avoid causing a shock to global oil markets.

Three of the eight buyers – Greece, Italy and Taiwan – have stopped importing Iranian oil. But the others had reportedly asked for their waivers to be extended.

US Secretary of State Mike Pompeo said Mr Trump’s decision not to renew the waivers showed his administration was “dramatically accelerating our pressure campaign in a calibrated way that meets our national security objectives while maintaining well supplied global oil markets”.

“We stand by our allies and partners as they transition away from Iranian crude to other alternatives,” he added.

“We have had extensive and productive discussions with Saudi Arabia, the United Arab Emirates, and other major producers to ease this transition and ensure sufficient supply. This, in addition to increasing US production, underscores our confidence that energy markets will remain well supplied.”

Saudi Energy Minister Khalid al-Falih said his country would “co-ordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance”.

The price of global benchmark Brent crude rose by 2.6% to $73.87 a barrel in trading on Monday, after earlier hitting $74.31 – the highest since November.

In recent months, the price of oil has risen due to an agreement between the Organization of the Petroleum Exporting Countries (Opec) cartel and its allies, including Russia, to cut their output by 1.2 million barrels per day (bpd).

Iranian exports are currently estimated to be below 1 million bpd, compared to more than 2.5 million bpd before Mr Trump abandoned the nuclear deal last May.



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