Iran will soon not be able to export oil to any country since the US government is all set to put an even more stern sanction in action, sans the waivers it had been allowing. The Trump administration is taking steps to put an end to a program that allowed five large nations, including China and India, to buy Iranian oil, despite the sanctions imposed on it by the US. Even though this decision can be viewed as the US government’s way to squeeze Tehran’s government, it would ultimately lead to higher oil and gasoline prices.
This move that aims to cease all exports of Iranian oil is a part of Trump administration’s aggressive pressure campaign to hit at Iran’s revenue that it hopes will eventually force political change among its ruling clerics and get it to rein in its military actions across the Middle East. However, this decision also elevates the risk of friction with other nations, including some important American allies. It will become a roadblock to the trade talks with China and also for the cooperation from Beijing on containing North Korea.
The core of Trump’s campaign against Iran has been relying heavily on economic sanctions since May 2018 when the President withdrew from the nuclear deal that the US and other countries had reached with Iran in 2015. When the US government announced major sanctions against Iran, it granted waivers to eight government and allowed them to continue purchasing oil from Iran. However, the governments were supposed to gradually decrease the amount of oil that they were purchasing from Iran and ultimately bring their oil imports from Iran to zero.
There were three countries — Italy, Taiwan, and Greece — that never used these waivers and immediately ceased to buy oil from Iran. Soon, there will be an official announcement in this regard and all waivers will be ended. Countries that do not stop buying Iranian will now have to face economic penalties from the US. China and India have been Iran’s largest customers and had continued to import oil from there under the waivers. America’s allies — South Korea, Turkey, and Japan were also using the waivers to obtain oil from Iran. Time will tell how these countries will take this announcement of doing away with the waivers and how they will meet their oil needs.
In recent weeks, all this has been a subject of very intense debate in Washington. John R. Bolton, the national security adviser, has strongly advocated discontinuing the waivers. On the other hand, Mr. Pompeo had been advised by some State Department officials to continue with it. Republican senators also recently sent a letter to President Trump — under the guidance of Senator John Cornyn, Republican of Texas — to end the waivers.
Senator Ted Cruz, Republican of Texas, also pressed Mr. Pompeo in a Senate hearing on the waivers and urged him to end two separate sets of waivers –one that allowed certain countries to purchase oil from Iran and the other that allowed some countries to work with Iran on a civilian nuclear program.
The decision also received support from Clifford D. May, President of the Foundation for Defense of Democracies. Saudi Arabia also showed interest in putting an end to waivers because Iran is its main competitor in the field of oil production and export. Saudi officials were disappointed earlier when there was a drop in global oil prices after the waivers were granted. Since they had expected that the Trump government will put maximum pressure on Iran and impose severe sanctions. Saudi had also increased its own oil production to make space for the vacuum in the market that would have been created because of the sanctions on Iran.
Iran exports about one million barrels of oil in a day as compared to the 2.7 million barrels that it used to before the US sanctions were put in place. Today, Iran provides roughly 1% of global supplies and the administration says that that will not lead to a surge in prices.