US official: Iran sanctions will not disrupt global oil supply

The US has granted leading importers of Iranian crude oil temporary waivers from sanctions on buying Iranian oil.
Friday 09/11/2018
A partially constructed gas refinery at the South Pars gas field is seen on the northern coast of Persian Gulf in Asalouyeh, Iran. (AP)
A partially constructed gas refinery at the South Pars gas field is seen on the northern coast of Persian Gulf in Asalouyeh, Iran. (AP)

WASHINGTON - A top US official expressed confidence that reinstated sanctions against the Iranian oil sector will not disrupt the global petroleum supply or drive up prices even as Iranian exports are slashed.

Brian Hook, the US State Department’s special Iran representative, said there would be no oil shortage, as some experts predicted.

“We foresee in 2019 that we will have more [oil] supply than demand,” Hook said November 7. He said oil costs approximately $72 a barrel, which is less than the $74-a-barrel price when US President Donald Trump announced in May that he was withdrawing from the Iran nuclear accord.

“We have been very careful about applying maximum economic pressure without lifting the price of oil and we’ve done that successfully,” Hook said. He credited Saudi Arabia with increasing its oil output to make up for a decline in Iranian oil exports of about 1 million barrels per day.

The United States had earlier said that leading importers of Iranian crude oil received temporary waivers from sanctions on buying Iranian oil. China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey were granted “temporary allotments” to import Iranian crude oil, US Secretary of State Mike Pompeo said.

China and India are the two largest importers of Iranian oil, buying approximately 1 million barrels per day, which is more than half of the 1.8 million barrels that Iran exports daily, the US Energy Department said. Italy, Japan and Turkey are also significant importers. US officials would not say how much oil the eight countries would be allowed to import.

The United States also agreed to allow Iran to continue building three nuclear facilities that produce energy for civilian use, including new reactors at the Bushehr Nuclear Power Plant.

Allowing Iran to continue construction “will improve ongoing oversight of Iran’s civil nuclear programme and will make these facilities less susceptible to illicit and illegal nuclear uses,” Pompeo said November 5. “Rest assured, Iran will never come close to getting a nuclear weapon on President [Donald] Trump’s watch.”

“What we’ve authorised is very narrow, very limited, very time-limited as well but it’s important nonetheless that these non-proliferation projects are not things that are taking place without some ability to see what’s going on,” he said.

The waivers to the eight countries were announced hours after the US reinstated broad sanctions on Iran’s energy, banking and shipping sectors aimed at increasing economic pressure on Tehran. The sanctions had been waived or lifted under a nuclear deal signed in 2015 by US President Barack Obama that sought to restrain suspected Iran’s nuclear-weapons programme.

Each of the eight countries “has already demonstrated significant reductions of their purchase of Iranian crude over the past six months,” Pompeo said, referring to when Trump announced that the United States would withdraw from the nuclear accord, known as the Joint Comprehensive Plan of Action.

All money Iran receives from oil sales to the eight countries is to be reserved for humanitarian projects or for buying goods that are not subject to sanctions.

“There are certain transactions they can continue to do whether they’re humanitarian or specific trade in restricted accounts,” US Treasury Secretary Steven Mnuchin said at a news conference November 5 alongside Pompeo. “We will make sure that humanitarian transactions are really going for those purposes. So, this is not about hurting the people of Iran but we will not let money be diverted to humanitarian purposes and then be put for terrorist activities.”

Pompeo told BBC News on November 7 that “there are big exemptions for medicine” and food imports “so that the Iranian people have foodstuffs.”

Iranian President Hassan Rohani issued a statement saying: “Today, Iran is able to sell its oil and it will sell.”

In comments on state TV, as reported by the Associated Press (AP), Rohani said: “We are in the economic war situation. We are confronting a bullying enemy. We have to stand to win.”

Iranian Foreign Ministry spokesman Bahram Ghasemi noted that some countries in Europe and Russia opposed the sanctions and said Iranians “have experienced more extensive sanctions” and that they are “not a new issue,” the AP reported.

However, Pompeo and Mnuchin said Iran’s economy had been severely damaged since May because more than 20 countries stopped importing Iranian crude oil. “The regime since May has lost more than $2.5 billion in oil revenue,” Pompeo said. “We continue negotiations to get all nations to zero” imports.

In addition to hitting Iran’s oil sector, the latest sanctions affect 50 Iranian banks and hundreds of Iranian aeroplanes and cargo ships, Mnuchin said. “We are watching the Iranian regime with laser focus. The maximum pressure exerted by the United States is only going to mount from here,” he said. “Companies around the world need to know we will be strictly enforcing our sanctions.”

Pompeo added: “Our objective is to starve the Iranian regime of the revenue it uses to fund violent and destabilising activities through the Middle East and indeed around the world. Our ultimate goal is to convince the regime to abandon its current revolutionary course.”