US Renews Iran Sanctions, Grants Oil Waivers to China, Seven Others

November 5, 2018 Updated: November 5, 2018

WASHINGTON/SEOUL‚ South Korea—The United States snapped sanctions back in place on Nov. 5 to choke off Iran’s oil and shipping industries, while temporarily allowing top customers such as China and India to keep buying crude from the Islamic Republic.

Having abandoned a 2015 Iran nuclear deal, U.S. President Donald Trump is trying to cripple Iran’s oil-dependent economy and force Tehran to quash not only its nuclear ambitions and its ballistic missile program but also its support for militant proxies in Syria, Yemen, Lebanon, and other parts of the Middle East.

Earlier, Iranian President Hassan Rouhani said Iran would to continue to sell its oil despite Washington’s “economic war.” Foreign Minister Mohammad Javad Zarif said U.S. “bullying” was backfiring by making Washington more isolated, a reference to other world powers opposed to the initiative.

Washington has pledged to eventually halt all purchases of crude oil from Iran globally but for now it said eight countries—China, India, South Korea, Japan, Italy, Greece, Taiwan, and Turkey—can continue imports without penalty. Crude exports contribute one-third of Iran’s government revenues.

“More than 20 importing nations have zeroed out their imports of crude oil already, taking more than 1 million barrels of crude per day off the market,” U.S. Secretary of State Mike Pompeo told reporters in a briefing. “The regime to date since May has lost over $2.5 billion in oil revenue.”

Pompeo said the waivers were issued to countries that have already cut purchases of Iranian crude over the past six months, and to “ensure a well-supplied oil market.”

U.S. officials have said the countries given temporary exemptions will deposit revenue in escrow accounts for Tehran to use solely for humanitarian purposes. The exemptions are usually designed to last up to 180 days.

Iran’s exports peaked at 2.8 million barrels per day (bpd) in April, including 300,000 bpd of condensate, a lighter form of oil that when underground tends to exist as gas. Overall exports have fallen to 1.8 million bpd since then, according to energy consultancy Wood Mackenzie, which expects volumes to drop further to 1 million bpd.

“This is only the beginning of the Iranian production curtailment story, not the end,” said Michael Tran, commodity strategist at RBC Capital Markets. “The market was previously overly focused on the number of countries receiving exemptions on imports from Iran. The Trump administration has made it clear that further reductions must be made over the coming months.”

Oil prices rallied above $85 per barrel in October on fears of a steep decline in Iranian exports. Prices have fallen since then on expectations that some buyers would receive exemptions and as supply from the world’s largest producers has increased.

On Nov. 5, international benchmark Brent crude oil futures were up nearly 0.6 percent to $73.23 a barrel and U.S. crude futures were up 0.4 percent at $63.39 a barrel.

‘Squeeze Iran Hard’

The sanctions also cover 50 Iranian banks and subsidiaries, more than 200 people and vessels in its shipping sector, Tehran’s national airline, Iran Air, and more than 65 of its aircraft, a U.S. Treasury statement said.

They include more corporate entities and individuals compared with sanctions imposed on Iran during the tenure of President Barack Obama, Trump’s predecessor.

“We’ve said for a long time: Zero should mean zero,” John Bolton, White House National Security adviser told Fox Business Network in an interview. “These are not permanent waivers—no way, we’re going to do everything we can to squeeze Iran hard.”

Oil markets have been anticipating the sanctions for months and the world’s biggest producers have been increasing output.

Joint output from the world’s top producers—Russia, the United States, and Saudi Arabia—in October rose above 33 million bpd for the first time, up 10 million bpd since 2010.

By Humeyra Pamuk & Jane Chung