US reimposes sanctions on Iran but grants major oil customers waivers

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The US granted temporary waivers to eight nations which will be allowed to continue importing Iranian oil, as Washington on Monday fully reimposed sanctions on Tehran that had been lifted under a multilateral nuclear deal.
The US granted temporary waivers to eight nations which will be allowed to continue importing Iranian oil, as Washington on Monday fully reimposed sanctions on Tehran that had been lifted under a multilateral nuclear deal. PIX: Ahmad Halabisaz/Xinhua via ZUMA Wire/dpa

The US granted temporary waivers to eight nations which will be allowed to continue importing Iranian oil, as Washington on Monday fully reimposed sanctions on Tehran that had been lifted under a multilateral nuclear deal.

The nuclear agreement signed in 2015 was meant to prevent Iran from obtaining a nuclear weapon. The US unilaterally withdrew from the deal in May, despite no proof Iran violated the agreement.

US Secretary of State Mike Pompeo listed the nations granted waivers: China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey. These are among the most significant customers of Iranian oil. All have pledged to reduce their imports.

Pompeo justified the six-month waivers by saying that the US was looking “to ensure a well-supplied oil market.” He insisted the US goal was to eventually reduce Iranian crude exports to zero.

Monday’s move also imposed sanctions on 700 Iranian entities and assets, including banks, raising to 900 the total under sanctions in recent years. Some of Iran’s civilian nuclear programmes escaped sanctions but will be under scrutiny, Pompeo said.

The US withdrawal earlier this year angered other partners to the nuclear deal – including Brussels, Beijing and Moscow – who also see it as vital to their national interests.

However, given Washington’s global dominance, it is still able to threaten businesses around the world that violate the sanctions, by locking them out of the US financial system.

Pompeo warned of “severe, swift punishment” to violators and regularly points out that European businesses have fled the country.

US President Donald Trump is now largely focused on what he describes as Iran’s malign activities in the Middle East. In particular, the US is upset about Tehran’s support for the Syrian government, Yemen rebels and Lebanon’s Hizbollah movement.

In part, Iran’s roles run counter to those of Saudi Arabia, Tehran’s regional rival and a staunch US ally. For example, Saudi Arabia has been fighting the Yemeni rebels since 2015, in a brutal war that has claimed thousands of lives and caused a humanitarian disaster.

“The Iranian regime has a choice: It can either do a 180-degree turn from its outlaw course of action and act like a normal country, or it can see its economy crumble,” Pompeo said in Washington.

Iran’s oil exports – making up more than half of its foreign revenue – have already dropped by a third since Trump made clear earlier this year that he intended to withdraw from the nuclear deal. An initial round of sanctions went back into force in August.

With the waivers helping, Brent crude moved higher by just 0.7 per cent as the sanctions returned and was trading at about 73 dollars a barrel, down from multi-year peaks reached in September, when it hit 85 dollars. A year ago, Brent was at about 65 dollars.

“Markets had a sense of what to expect,” said Ellen Wald, an expert on energy at the Atlantic Council think-tank. “In the short term we are looking at a limited impact, in part because of these exemptions.”

She noted that the waivers are temporary and “we could see some impact coming later.”

It remains unclear how Iran can continue to purchase legal humanitarian goods, as the US measures have cracked down hard on the financial sector. Washington simply says it is up to Tehran to devise a method.

Iran’s leadership remained defiant as the sanctions were brought back, with President Hassan Rowhani saying the country can “master the crisis” and describing the situation as an “economic war.”

He also pledged to continue to sell oil on global markets. “We are proud to break the sanctions because these sanctions are illegal and unfair and against UN resolutions. Therefore all countries should break these sanctions,” he said.

Iran’s ambassador to the United Nations, Gholamali Khoshroo, urged the organization to take steps against the US, calling the sanctions “irresponsible.”

Iran’s economy is already being hit by the sanctions – the local currency has seen a sharp collapse – but it remains unclear how hard the US’ moves will bite and whether they are sufficiant to force Tehran to change its foreign policy in line with US demands.

Experts are also divided on whether Iran’s hardliners – the opposition to Rowhani, a relative moderate – will be empowered by the situation and if they could push Tehran to withdraw itself from the 2015 nuclear deal.

In a blow to European efforts to keep the deal alive, SWIFT, which enables secure financial transfer, was suspending “certain Iranian banks’ access,” following the US announcements.

“This step, while regrettable, has been taken in the interest of the stability and integrity of the wider global financial system. Our mission remains to be a global neutral messaging provider,” SWIFT said.

Several European nations are working to set up a financial vehicle for businesses to continue to engage with Iran without facing US sanctions, although they have not yet fully revealed the plan.

Israeli Prime Minister Benjamin Netanyahu on Monday thanked Trump for reimposing the sanctions, calling it “a historic day.” -DPA

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