US Sanctions on Iran

Trump Administration lifts Sanctions Waivers for Countries Importing Oil from Iran

Trump Administration lifts Sanctions Waivers for Countries Importing Oil from Iran

On April 22nd, the Trump administration removed the ability for countries such as Japan, Turkey, India, China, Turkey, and South Korea, to purchase crude oil from Iran with US sanction immunity. The news comes as the United States of America intensifies tensions on Iran, by reestablishing oil sanctions in a move that aims to counter the funding of terrorist organizations across the Middle East.

On Monday during a State announcement, Mike Pompeo, the US Secretary of State said:

“Almost one year ago after withdrawing from the Iran nuclear deal President Trump implemented the strongest pressure campaign in history against the Islamic Republic of Iran. The goal remains simple, to deprive the outlaw regime of the funds it has used to stabilize the Middle East for four decades and incentivize Iran to behave like a normal country. Up to 40 percent of the regime’s revenue comes from oil sales. It’s the regime’s number one source of cash. Before our sanctions went into effect Iran will generate as much as 50 billion dollars annually in oil revenue.”

“Overall to date, we estimate that our sanctions have denied the regime well north of 10 billion dollars. The regime would have used that money to support terror groups and continue its missile development in defiance of UN Security Council resolution 2231. Our goal has been to get countries to cease importing Iranian oil entirely. Last November we granted exemptions from our sanctions to 7 countries. Today I’m announcing that we will no longer grant any exemptions. We will continue to enforce sanctions and monitor compliance. Any nation or entity interacting with Iran should use its diligence and err on the side of caution. The risks are simply not going to be worth the benefits.”

To watch the full announcement, click here.

Crude Inventories

Through the reinstatement of heavy US sanctions against the importation of Iranian crude oil, the Trump administration is attempting to strangle Iran’s main source of revenue that is believed to be used to support and subsidize major terrorist organizations across the Middle East.  

The exemptions were granted to give countries that imported Iranian crude oil some breathing space until they could find different sources of crude oil and to avoid a huge market crash. Italy, Greece, and Taiwan are amongst the countries that have located alternative suppliers.

On the other hand, the disintegration of the waivers has sparked an opposite reaction in nations such as Iran’s neighboring ally and major trade partner, the Republic of Turkey. Turkey has made a public appeal for an extension to the sanctions because it claims that oil imported from Iran is an integral aspect of and vital for energy demands.

The Turkish Minister of Foreign Affairs, Mevlut Cavusoglu tweeted the following statement:

“The US decision to end sanctions waivers on Iran oil imports will not serve regional peace and stability yet will harm Iranian people. Turkey rejects unilateral sanctions and impositions on how to conduct relations with neighbors.”

China has also voiced its opposition and protest against the Trump administration’s widespread and absolute sanctions against the import of Iranian crude oil. Geng Shuang, a Chinese foreign ministry spokesman said: “China has long been against U.S.’ unilateral sanctions and long-arm jurisdiction against other countries.” Taken from CGTN.com. China could pose the greatest threat to the US sanctions because it depends greatly upon its imports of Iranian oil.

Abbas Mousavi, a spokesperson for Iran’s Foreign Ministry said the US sanctions were illegal but that in the wake of the debilitating sanctions, the Iranian Ministry of Foreign Affairs will be undertaking serious negotiations and talks with other trading nations.

“Mousavi however noted that the negative impacts of these sanctions are likely to exacerbate as the exemptions has not been exempted and therefore Iran’s Ministry of Foreign Affairs is in constant contact with related internal bodies and is also busy negotiating with foreign allies, either the European and international ones and the neighbors in this regard. He said that the results of these contacts and negotiations will be conveyed to high decision-making bodies of the Iranian system to adopt and announce the due decision in regard to the new developments.”

Taken from the Islamic Republic News Agency.

Iran has repeated its warning that it could shut down the Strait of Hormuz, the route by which approximately a third of the traded crude oil travels.

US Secretary of State, Mike Pompeo reassured those with concerns of market imbalances saying: “I want to emphasize that we have used the highest possible care in our decision to ensure market stability. The United States has been in constant discussion with allies and partners to help them transition away from Iranian crude to other alternatives. We’ve been working with major oil-producing countries to ensure the market has sufficient volume to minimize the impact on pricing; both the Kingdom of Saudi Arabia and the United Arab Emirates have assured us they will ensure an appropriate supply for the markets.”

Watch the full clip here.

Chairman of the Council of Economic Advisers, Kevin Hassett also agrees with Pompeo’s statements despite the price of crude oil jumping upwards by 2.4 percent.

Saudi Arabia’s Minister of Energy, Industry and Mineral Resources said the following:

“Saudi Arabia is closely monitoring the oil market developments following the recent statement from the U.S. government regarding oil export sanctions on Iran, Saudi Arabia will coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance.”

Taken from Reuters.com.

To what degree has the price of oil been affected by these updates?

As reported by the US Department of Energy, US crude inventories plummeted by around 1.5 million barrels. Brent crude oil stands at $74.44 a barrel.

What are the ramifications of the Trump administration’s decision to halt waivers for importers of Iranian oil?

The US Government’s conclusion to stop all exemptions for the sanctions on Iranian oil comes at a time when the US is strengthening its pressure on Iran to sit down for trade talks, moreover to hinder the support of the fundamentalist terror groups. Such a crippling sanction on countries that are heavily reliant upon Iranian oil could cause a spike in oil prices, as seen by Turkey’s reaction and China’s disapproval of the move, and finally not to mention the response of Iran itself, having issued its warning that it could close the Strait of Hormuz.

“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. The President’s decision to eliminate all SREs follows the designation of the Islamic Revolutionary Guard Corps as a Foreign Terrorist Organization, demonstrating the United States commitment to disrupting Iran’s terror network and changing the regime’s malign behavior. We welcome the support of our friends and allies for this effort.​”

Taken from a statement from the US Press Secretary.

US Sanctions on Iranian Crude Oil

Could INSTEX, the EU-Iran vehicle for trade, play an important role in the US oil sanctions?

INSTEX (The Instrument in Support of Trade Exchanges) is a European Union-led vehicle that in theory could promote trade and business between the EU and Iran whilst sidestepping heavy US sanctions. It was certified after long discussions and consultations following the Trump administration’s decision to withdraw from the Iran nuclear deal that President Obama had secured that saw all US sanctions on Iran dismissed on conditions that Iran suppressed its nuclear program.

Essentially INSTEX works by enabling trade between Iranian and European companies. Initially trade could involve products and services that are exempt from the US sanctions such as humanitarian, agricultural and pharmaceutical goods.

Which countries are participants in INSTEX? France, the UK, and Germany initiated the vehicle and have probed other EU members to build support for the trading entity should the US respond negatively. Despite the idea that INSTEX could shield EU-Iran trade from US sanctions, some European companies have departed from Iran following the US decision to remove waivers.

Daimler AG, the German multinational car company halted all business operations in Iran in the wake of the US sanctions. “We have ceased our already restricted activities in Iran in accordance with the applicable sanctions, we will continue to closely monitor the political developments, especially in connection with the future of the nuclear agreement.”

Taken from aawsat.com.

Final note

During his announcement the US Secretary of State, Mr. Pompeo said: “these demands are not just coming from the United States Government and many of our allies and partners they are similar to what we hear from the Iranian people themselves. I want the Iranian people to know that we are listening to them and standing with them.”

The decision made by the US attempts to respond to the threat of terrorism in the Middle East by pressurizing and damaging Iran’s revenue, the source of funding for the terrorist group, but at the same time undertake measures, through the support of other oil exporters to ensure the markets remain stabilized.  

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