US intensifies efforts to stop Iran’s oil exports

The United States is trying to persuade countries from Europe to Japan to scale back imports of Iranian oil.
Sunday 08/07/2018
Tighter screws. A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Arabian Gulf. (Reuters)
Tighter screws. A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Arabian Gulf. (Reuters)

WASHINGTON - The United States intensified diplomatic and military efforts to convince countries to stop importing oil from Iran and support economic sanctions that the Trump administration plans to reimpose.

With some sanctions to resume August 4, the United States is trying to persuade countries from Europe to Japan to scale back imports of Iranian oil. Officials, including US President Donald Trump, asked OPEC countries, particularly Saudi Arabia, to increase production to compensate for a reduction in Iranian oil on the international market.

Iranian leaders waged their own diplomatic efforts to keep the nuclear agreement alive — and forestall an expansion of sanctions — despite the US decision in May to withdraw from the Joint Comprehensive Plan of Action.

The US effort is tricky because it involves trying to penalise the Iranian economy without driving up oil prices, which would increase prices at the petrol pumps in the United States before US congressional elections in November. US sanctions related to importing Iranian oil are to take effect November 4.

A US State Department official signalled on June 26 that the Trump administration planned a hard line on which countries would be given waivers to import Iranian oil.

“We view this as one of our top national security priorities,” a senior US State Department official said in a background briefing. “I would be hesitant to say zero waivers ever. I think the predisposition would be, no, we’re not granting waivers.”

US crude oil prices spiked to their highest level in nearly four years after the comments. The State Department to soften its stance July 2 when State Department Policy Director Brian Hook left the door open to certain countries receiving waivers from US sanctions. He also indicated the United States was trying to maintain oil supply.

“We are working to minimise disruptions to the global market,” Hook said. “We are confident that there is sufficient global spare oil production capacity.”

Hook said that while “we are not looking to grant licences or waivers,” US officials “are prepared to work with countries that are reducing their imports on a case-by-case basis.”

Hook’s comment was widely seen as a signal to China, India and Turkey, which have said they will continue to import Iranian oil. The three countries are some of the biggest buyers of Iranian oil and their reducing imports from Iran is essential to the Trump administration’s strategy.

Trump waged his own version of diplomacy via Twitter, targeting major oil-producing countries. On June 30, he wrote that he “just spoke to” Saudi King Salman bin Abdulaziz Al Saud and asked Saudi Arabia to increase oil production by as much as 2 million barrels per day. “He has agreed!” Trump wrote.

The White House stepped back Trump’s assertion with a statement reporting that King Salman told Trump that his country has “a 2 million barrel per day spare capacity, which it will prudently use if and when necessary to ensure market balance and stability.”

Saudi officials have said they were prepared to increase oil production but did not specify an amount. Analysts said it would be impossible for Saudi Arabia, which produces 10 million barrels of oil per day, to increase its daily output by 2 million barrels.

Trump ratcheted up the pressure on OPEC to increase oil production on July 4, tweeting: “The OPEC Monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $’s. This must be a two-way street. REDUCE PRICING NOW!”

The US military signalled that it would keep channels in the Arabian Gulf open to oil tankers despite a threat from Iranian President Hassan Rohani to block transits through the waterway. A US military spokesman told the Associated Press that the US Navy and its Middle East allies “stand ready to ensure the freedom of navigation and the free flow of commerce wherever international law allows.”

The US diplomatic and military efforts against Iranian oil production are “an economic offensive intended to collapse the Iranian government, which is already contending with a steady tempo of internal unrest driven by economic and political frustrations,” former State Department Iran adviser Suzanne Maloney wrote for the Brookings Institution.

Hook noted in his comments July 2 that investment in Iran was declining and that Iran’s currency, the rial, recently hit an all-time high against the dollar.