Queue lengthens for US waivers on sanctions applied to Iran's oil exports

Queue lengthens for US waivers on sanctions applied to Iran's oil exports
The oil tanker Pentathlon is seen navigating through the Bosphorus strait, Turkey.
By bne IntelliNews October 22, 2018

Top Turkish refiner Tupras is reportedly in talks with US officials to obtain a waiver permitting it to keep buying Iranian oil after Washington reinstates sanctions on the Islamic Republic’s oil, ,gas and petrochemical sectors on November 5.

Oil industry sources were on October 21 quoted by Reuters as saying Tupras has joined other waiver seekers such as Indian energy officials queuing to obtain special Trump administration exemptions to continue importing Iranian crude shipments without fear of penalty.

With few energy natural resources of its own, Nato member Turkey depends heavily on oil and gas-rich neighbour Iran to meet its energy needs. During 2017, Iran was Turkey’s top crude oil source, accounting for 11.5mn tonnes of its total purchases of near 26mn tonnes, followed by Iraq and Russia.

During the Barack Obama administration, when multilateral sanctions were brought to bear on Iran—as against the unilateral measures introduced by Donald Trump—sanctions waivers on Iranian oil imports were in the 2013-2015 period granted to countries that reduced their intake by at least 20%.

This time round, US Treasury Secretary Steven Mnuchin has said Washington is going to take a less generous approach, while White House National Security Advisor John Bolton has said any waivers would be “few and far between”. Mnuchin said on October 21 that a reduction by a minimum one-fifth would not be good enough and that, in the longer term, importers of Iranian oil with waivers would be expected to join the drive to reduce crude shipments from Iran to zero.

Strangling Iran’s economy
Wrecking Iran’s oil export industry is crucial to the US strategy of strangling the country’s economy until Tehran is forced to come to the table to renegotiate its Middle East policies as well as its nuclear and ballistic missile development programmes.

Mnuchin told a news briefing: "I would expect that if we do give waivers, it will be [according to] significantly larger reductions [than 20%]. Oil prices have already gone up, so I expect that the oil market has anticipated what's going on in the reductions. I believe the information is already reflected in the price of oil."

His comments come with Iran ramping up efforts to deflect efforts by the US to cut off its oil exports by shutting off location-beacons on its ocean-going tankers, among other attempts to hide the true extent of shipments.

Meanwhile, there are proliferating reports that OPEC members such as Saudi Arabia are struggling to find the capacity to replace the Iranian oil which the US is successfully driving from the market, placing Washington in a bind—if oil prices rise in the run-up to the November 6 US mid-term elections that could prove to be a vote loser with the US motorist. Another unhelpful consequence of rising oil prices for the US is that the higher they go, the less oil Iran has to sell to maintain its oil revenues.

"I don't expect we will get to zero [Iranian oil exports] in November, but I do expect we will eventually get to zero," Mnuchin told journalists, adding: "There have been already very significant reductions in advance of this date."

Brian Hook, the US Special Representative on Iran, told reporters on October 22 that countries seeking sanctions relief must “explain their specific and unique circumstances”.

After November 4, refiners found to have made Iranian oil purchases illicit in the White House’s eyes could lose their access to the US financial system under secondary sanctions.

The International Energy Agency has estimated that Iran’s oil exports fell to 1.6mn barrels per day (mb/d) in September, down 800,000 bpd from the year’s peak in April at 2.4 mb/d.

China’s flat-out refusal
China, the biggest importer of crude from Iran ahead of India, has flat out refused to cooperate with the US-demanded embargo on Iranian oil, pointing out that the sanctions do not have the blessing of the UN and that apart from the US all the major powers who signed up to the 2015 Iran nuclear deal—which shields Iran from heavy sanctions in return for compliance with measures that put a brake on its nuclear development programme—remain in the accord.

According to Reuters, “an unprecedented volume of Iranian crude oil is set to arrive at China’s northeast Dalian port this month and in early November before US sanctions on Iran take effect”. That volume is an estimated 20mn barrels, up from the usual one to three million barrels per month.

In further efforts to keep its oil flowing, Iran has discounted its oil by the most in 14 years, according to Bloomberg, making it hard to say no to for potential buyers.