The United States will begin fully enforcing sanctions on Iranian oil in early May with the goal of choking off the Islamic regime’s key export, the Trump administration announced April 22.
Upon imposing sanctions on Iranian oil exports in late 2018, Washington granted six-month waivers to eight of Tehran’s main oil buyers: China, India, Japan, South Korea, Taiwan, Turkey, Italy, and Greece. The United States administration won’t renew those waivers in early May, the White House said.
“This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” White House press secretary Sarah Sanders said in a statement.
“The Trump administration and our allies are determined to sustain and expand the maximum economic pressure campaign against Iran to end the regime’s destabilizing activity threatening the United States, our partners and allies, and security in the Middle East.”
President Donald Trump wants to end the waivers to exert “maximum economic pressure” on Iran by cutting off its oil exports and reducing its main revenue source to zero. Up to 40 percent of the Islamic regime’s revenue comes from oil sales, according to the State Department.
The United States is coordinating efforts with Saudi Arabia and the United Arab Emirates to increase oil output to offset any supply worries triggered by the waiver terminations, Sanders said.
“We have agreed to take timely action to assure that global demand is met as all Iranian oil is removed from the market,” Sanders said.
Secretary of State Mike Pompeo said on April 22 that the United States has received assurances from both Saudi Arabia and the United Arab Emirates that they will “ensure an appropriate supply for the markets.” Both nations are working with Iran’s customers to ensure a smooth transition, Pompeo added.
Early reports of the waiver announcement led to a 3 percent jump in crude prices to their highest for 2019 so far. The oil market is significantly influenced by speculation and news reports. The price jump represents an expectation by speculators that oil supply will drop with Iran’s exports extinguished.
Trump views high oil prices as bad for the U.S. economy and has often publicly called on the Organization of the Petroleum Exporting Countries (OPEC) to increase output to drive down oil prices.
Trump spoke with Saudi Arabia’s Crown Prince Mohammed bin Salman by phone on April 9. The White House said the president used the call to discuss ways of “maintaining maximum pressure against Iran.”
Analysts said they expected the Trump administration to push OPEC and its de-facto leader Saudi Arabia to stop withholding supply to calm market fears of oil shortages.
“If there is a time for the U.S. to be able to take a hard line, it is now, with the Saudis having over 2 million barrels (per day) of spare capacity,” said Tony Nunan, oil risk manager at Mitsubishi Corp. in Tokyo.
An end to the waivers would hit Asian buyers hardest. Iran’s biggest oil customers are China and India, which have both been lobbying for extensions to sanction waivers.
A Chinese Foreign Ministry representative didn’t say whether China would abide by the sanctions after its waiver expires. India, South Korea, and Japan didn’t comment officially.
Prior to the reimposition of sanctions, Iran was the fourth-largest oil producer among OPEC, at almost 3 million barrels per day, but April exports have shrunk to well below 1 million barrels per day, according to ship-tracking and analyst data in Refinitiv.
Pompeo said on April 22 that prior to the sanctions, the Iranian regime brought in $50 billion annually in oil revenue. He said measures to date have denied the regime more than $10 billion in revenue.
In September 2018, the United States outpaced Russia and Iran to become the world’s largest crude oil producer for the first time in nearly two decades.
The United State considers Iran an “outlaw regime” and the world’s biggest supporter of radical Islamic terrorism. Washington demands that Tehran halt its nuclear weapons program, stop developing ballistic missiles, end support for radical Islamic terrorism, cease human rights abuses, and terminate its threats to maritime and cybersecurity.
“The goal remains simple: to deprive the outlaw regime of the funds it has used to destabilize the Middle East for four decades and incentivize Iran to behave like a normal country,” Pompeo said at a press conference at the State Department on April 22.
“We will continue to apply maximum pressure on the Iranian regime until its leaders change their destructive behavior, respect the rights of the Iranian people, and return to the negotiating table,” Pompeo added.
Pompeo noted that the demands aren’t coming solely from the United States and its allies, but from the Iranian people as well.
“I want the Iranian people to know that we are listening to them and standing with them. We will not appease their oppressors as the last administration did,” Pompeo said.
Trump quit the Iran nuclear deal, saying it failed to protect the United State from a nuclear threat from Iran. Shortly before Trump withdrew from the deal, Israel unveiled a trove of documents proving that Iran secretly preserved its nuclear weapons research archives and deceived world leaders about the peaceful intent of its nuclear program.
Pompeo advised nations dealing with Iran to “err on the side of caution” to avoid being hit with sanctions.
“The risks are simply not going to be worth the benefits,” Pompeo said.
Reuters contributed to this report.