The Trump administration yesterday said it will end sanction exemptions on oil purchases from Iran for seven countries and Taiwan beginning in May, prompting pushback from countries that purchase Iranian oil and a sharp rebuke form the Islamic Republic.
Iran stands to lose billions in revenue to crude producers in the U.S. and Gulf states over the sanctions.
Yesterday Secretary of State Mike Pompeo said Iranian oil exports had generated around $50 billion annually and the country has already suffered $10 billion in losses from a partial sanction roll out last November.
Pompeo said the hope is to eliminate all of Iran’s oil exports. “We’re going to zero – going to zero across the board,” he said.
Iran’s Foreign Minister Javad Zarif called the move “economic terrorism” over social media and accused the Trump administration of acting out of “panic” and “desperation.”
This morning Iran’s Parliament passed a resolution naming American forces in the U.S. Central Command (CENTCOM) as a “terrorist” organization.
Iran’s ministry of culture publication IRNA called it a “reciprocal action” in response to Trump labeling the Iranian Revolutionary Guard a terrorist organization on April 8. That same day Iran’s National Security Council designated U.S. forces as terrorists.
In November the Trump administration began limited sanctions on Iranian oil purchases, but gave exemption waivers to Greece and Italy, which immediately stopped purchasing Iranian oil, and Turkey, South Korea, China, India, Japan, and Taiwan. Those exemptions expire on May 2, 2019.
Before announcing the sanctions, President Trump consulted with both Saudi Arabia and the United Arab Emirates, which agreed to increase their foreign sales. The Gulf states “have assured us they will ensure an appropriate supply for the markets,” Pompeo said, “And of course, the United States is now a significant producer as well.”
The sanctions could mark a bonanza for American oil companies as U.S. crude sales have already skyrocketed in the last year, making the U.S. the largest producer in the world, narrowly beating out Russia and Saudi Arabia. In January the Energy Information Agency reported crude export had doubled from the same time last year with 2.575 thousand barrels of sold per day.
“Our goal has been to get countries to cease importing Iranian oil entirely,” Pompeo said. “We did this to give our allies and partners to wean themselves off of Iranian oil, and to assure a well-supplied oil market.”
Oil prices continued to surge today, amid worries of coming scarcities on the market. Bloomberg reported prices jumped 2.9 percent Monday, reaching a six-month high of $75 a barrel.
Iranian officials have pointed to interrupted supplies from both Libya and Venezuela as a potential upset to the optimistic U.S. price models.
“In this fragile situation, no one can ensure if oil is being supplied to the market as much as needed,” Iran’s oil minister Bijan Zangeneh told his country’s Parliament today. He added that “some countries in the region overstate their surplus oil production capacity in order to provoke the U.S. and put pressure on Iran,” reported the state-owned Fars News Agency.
“I repeat, the United States and its allies have committed a big mistake by politicizing oil and using it as a weapon and the aftermaths of which will be felt by themselves,” Zangeneh continued.
The sanctions are the latest Trump administration attempt to pressure Europe into leaving JCPOA, or the Iran nuclear deal. The U.S. pulled out of the agreement last May. As an alternative the Trump administration promoted a 12 point-plan that seeks not only to give the International Atomic Energy Agency unfettered access to all Iranian nuclear sites and its historical records on all nuclear production, but also curtail Iranian activity across the region. The plan demands the withdraw of Iranian forces from Syria and an end of support to Hizbollah and Hamas.
Last July, Iran’s President Hassan Rouhani threatened that if Trump expanded sanctions on Iranian oil he would retaliate by closing the Strait of Hormuz to foreign ships. He told a group of ambassadors, “Mr. Trump! Do not twist the lion’s tail because you will regret.”
Purchasers of Iran’s oil have already panned the sanctions as economic bullying and accused the U.S. of self-dealing and enriching its oil-producing allies.
China’s spokesperson for its foreign ministry Geng Shuang yesterday opposed the sanctions and accused the U.S. of “long-arm jurisdictions,” as the sanctions were unilaterally imposed by the U.S., CNN reported.
“Our cooperation with Iran is open, transparent, lawful and legitimate, thus it should be respected,” Shuang said.
Turkey’s foreign minister Mevlut Cavusoglu said pushing countries to make purchases from the U.S. and its allies at the expense of Iran is “wrong” and “violates the regulations of the World Trade Organization (WTO) and poses a risk to stability in the region,” Turkey’s Anadolu Agency reported.
By contrast, Israel’s Benjamin Netanyahu praised the decision.
“The decision of President Trump and the American administration is of great importance in increasing the pressure on the Iranian terrorist regime. We stand alongside the determination of the US against the Iranian aggression and this is the right way to stop it,” he said.