US tells the world to quickly stop buying Iranian oil or face sanctions

US tells the world to quickly stop buying Iranian oil or face sanctions
Iranians pictured protesting against Trump prior to his withdrawal from the nuclear deal. / twitter
By bne IntelliNews June 26, 2018

A senior US State Department official on June 26 warned that the world must stop buying Iranian oil before November 4 or face a renewed round of American economic sanctions.

"We're not granting waivers," the official told reporters in remarks aimed at foreign capitals. Washington’s tightening of the noose on Tehran was described as "one of our top national security priorities."

The hardline sanctions approach is to target all countries including Iran’s biggest oil customer China, second biggest India and its neighbour Turkey. However, like the UK, France, Germany, Russia and a great many other countries, these nations have not backed Trump’s early May decision to unilaterally withdraw from the multilateral Iran nuclear deal and impose highest-level sanctions on Iran and secondary sanctions on any foreign traders or investors who continue to do business with the Iranians.

The message conveyed by the US State Department ends any hope that the Trump administration would compromise and follow the sanctions model pursued by Barack Obama during his economic campaign against Iran—OPEC’s third biggest oil exporter—prior to the late 2016 signing of the nuclear accord. His administration asked buyers of Iranian crude to cut their imports by 20% every 180 days while it ramped up the pressure against Iran. But the State Department has now confirmed that Iranian crude buyers should be scaling down purchases now, with the goal of zeroing out their purchases by November 4, the 180-day mark from Trump's nuclear deal pullout and the renewal of US sanctions.

China’s ‘Iran oil lever’
European powers have in particular been trying to negotiate US waivers against secondary Iran sanctions for their companies, but China’s approach to the hardline US strategy will perhaps be most interesting given that on June 20 it was reported that Beijing has an ‘Iran oil lever’ over Trump which it is using to apply pressure in its growing trade dispute with Washington.

Last week, the US was attempting to convince Japan of the merits of its tough sanctions stance, which it says is designed to press Iran into such dire economic straits that it will be forced to negotiate a new nuclear deal that will greatly reduce its political and military footprint in Middle East conflict zones, while also barring its path to developing a nuclear weapon.

The senior US official, briefing reporters on condition of anonymity, admitted that the toughness of the sanctions regime would be unpopular and said of the efforts to persuade the Japanese to back it: "I don't think the Japanese answer was particularly different than that of other oil importing countries.

"The official added that he planned to visit China and India soon to discuss the sanctions.

"This is a challenge for them. This is not something that any country that imports oil from Iran... wants to do voluntarily because, you know, we're asking them to make a policy change,” he said.

"China, India? Yes, certainly their companies will be subject to the same sanctions that everybody else is," he said. "We will certainly be requesting that their oil imports go to zero."

China “could tilt the world scales in determining how much Iranian crude will be taken off the world market”, the 'oil lever' report on Beijing’s Iran oil strategy observed. Also, in the tit-for-tat tariff war with the US, China said last week it intended to put tariffs on US oil imports. The US has been growing its own oil exports and ships around 2mn barrels a day (b/d) of crude. About 300,000 b/d goes to China, and China could conceivably stop those purchases and replace them with Iranian oil.

China and India import around 700,000 and 550,000 b/d of Iranian oil, respectively. Iran exports more than 2mn b/d.