US Envoy Doubts Iran’s Last Oil Customers Will Want to Run Afoul of U.S. Sanctions

By Patrick Goodenough | April 23, 2019 | 4:21 AM EDT

An oil tanker offloads its cargo in Kochi, India. (Photo by Kaveh Kazemi/Getty Images)

(CNSNews.com) – The Trump administration does not believe any of the small handful of remaining countries that buy Iranian oil will risk U.S. sanctions by continuing to do so after waivers currently in place expire on May 2, Iran special representative Brian Hook said Monday.

He was speaking hours after Secretary of State Mike Pompeo announced that the waivers will not be renewed beyond that date – and that no grace periods will be given.

“We’re going to zero across the board,” Pompeo told reporters at the State Department, adding that no waivers would be extended beyond May 2, “full stop.”

“We don’t anticipate that countries are going to choose to risk being sanctioned,” Hook told Bloomberg TV. “To date no country has.”

The countries affected by Monday’s announcement are China, India, Japan, South Korea, and Turkey. China and India have been the biggest importers of Iranian oil in recent years, according to the U.S. Department of Energy’s Energy Information Administration (EIA).

When the oil sanctions that had been eased as a result of the 2015 Iran nuclear deal were restored last November, those five countries were given six-month waivers to help wean themselves off Iranian supplies. (Waivers were also approved for Taiwan, Italy and Greece, but they have since stopped importing Iranian oil.)

China and Turkey strongly criticized the announcement, but the Indian, Japanese and South Korean governments reacted cautiously, declining to make any substantive public comment.

Overall, Iran’s oil exports have dropped from more than 2.5 million barrels per day (bpd) when President Trump last May announced the U.S. withdrawal from the nuclear agreement to around one million bpd now, according to the administration.

Hook recalled that not that long ago more than 20 countries were buying oil from Iran and were no longer doing so.

“There’s no hint at all that they want to run afoul of American sanctions,” he said, adding that he did not expect the remaining customer countries would want to do so either.

“We’re essentially giving countries a choice: You can either do business with the United States, or you can import Iranian crude oil. And given that choice it’s not a hard decision.”

The move announced Monday means that the Iranian regime will no longer be able to sell any oil, unless the buyer of that oil is prepared to risk consequences including, the State Department said, “losing access to the U.S. financial system and the ability to do business with the United States or U.S. companies.”

In a bid to facilitate the process, and ensure the stability of global markets, the administration says it has secured undertakings from Saudi Arabia and the United Arab Emirates to make up for difference in oil supplies.

The U.S. has a supply role to play too. The State Department said Monday U.S. crude oil production has risen by 1.6 million bpd to 12 million bpd over the past year and that the EIA forecasts a further 1.4 million bpd increase within the next year.

Exports of U.S. crude have also risen significantly, reaching 2.575 million bpd in January, an increase of over 1.2 million bpd from the previous year.

‘The money from Iran is not flowing in as it once did’

Whether imports of Iranian oil do drop to “zero” as envisioned by the U.S. remains to be seen. Analysts say companies in some countries could find ways to pay for the oil that are exempt from the U.S. financial system.

The administration says the aim of the oil sanctions and other U.S. pressure on Iran is to compel the regime to change its behavior in the region and at home.

Already, it claims successes as a result of depriving Iran of a chunk of its principle source of revenue.

Pompeo said at the State Department the U.S. estimates its sanctions have to date deprived the regime of more than $10 billion, which he said would have been used to fund terrorist groups like Hezbollah and Hamas, and to bankroll its ballistic missile development program.

The administration has pointed to evident financial difficulties faced by Hezbollah’s Iran’s terrorist proxy in Lebanon which has been a U.S.-designated foreign terrorist organization since 1997.

“In March, Hezbollah leader Hassan Nasrallah publicly appealed for donations for the first time ever,” the department said. “He has been forced to undertake unprecedented austerity measures because the money from Iran is not flowing in as it once did thanks to our unprecedented pressure.”

As recently as mid-2016 – six months after the nuclear deal negotiated by the Obama administration and its partners started ushering in significant sanctions relief to Iran in return for curbs on its nuclear program – Nasrallah boasted that his group’s every need, from food to weapons, was met by Tehran, and that “as long as Iran has money we will have money.”

A Foundation for Defense of Democracies (FDD) report on Hezbollah financing the following year found that Iran accounted for 70-80 percent of the terrorist group’s budget, or an estimated $700-$800 million a year.

Citing Hezbollah’s inability to “make payroll in a timely fashion,” Pompeo said Monday the U.S. campaign has eroded Iran’s power, and “their capacity to wreak harm around the world is absolutely clearly diminished.”

“The goal remains simple,” he said. “To deprive the outlaw regime of the funds it has used to destabilize the Middle East for four decades and incentivize Iran to behave like a normal country.”

He also characterized the move as also being in the interests of the Iranian people themselves.

“I want the Iranian people to know we are listening to them and stand with them,” Pompeo said. “We will not appease their oppressors, as the last administration did. Our hopes are for a better life for them, and all people afflicted by the regime’s violence and destruction.”

Iran’s foreign ministry said Monday it was “holding intensive talks with many of its foreign partners including the Europeans, the neighbors, and other countries in the world” about the U.S. decision not to extend the waivers.

Patrick Goodenough
Patrick Goodenough
Spencer Journalism Fellow

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