Donald Trump wants to get the Iranian-sanctions band back together, this time targeting Tehran’s most reliable source of funding. The US will no longer waive sanctions on countries that import Iranian oil, the White House announced today, in an attempt to “bring Iran’s oil exports to zero.” The Washington Post’s Josh Rogin reported the decision yesterday, which comes after months of warnings from the Trump administration:
About one year after the United States decided to leave the Iran nuclear deal, the State Department is set to announce that all countries will have to completely end their imports of Iranian oil or be subject to U.S. sanctions. This is an escalation of the Trump administration’s “maximum pressure” campaign, which seeks to force Tehran to end its illicit behavior around the world.
On Monday morning, Secretary of State Mike Pompeo will announce to the media that, as of May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate, two State Department officials told me. Last November, the State Department issued 180-day waivers to eight countries to give them more time to find alternative sources of oil. Now, their time is running out.
CNBC and other media outlets confirmed the policy change this morning, ahead of a presser by Secretary of State Mike Pompeo discussing the change. The news will disappoint a handful of countries that rely on Iranian oil, but Pompeo insisted that the waivers have to stop immediately. At least in the short term, Pompeo promises that the reimposition of sanctions will not impact global supply or pricing. If nations continue to trade with Iran, Pompeo warned, “the risks are simply not going to be worth the benefits”:
— CBS News (@CBSNews) April 22, 2019
“President Donald J. Trump has decided not to reissue Significant Reduction Exceptions (SREs) when they expire in early May,” the White House said in a statement. “This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue.”
Trump unilaterally withdrew from a 2015 nuclear accord with Iran last May and restored wide-ranging sanctions on the Iranian economy in November. At the time, his administration granted waivers to eight countries that allowed them to continue importing limited quantities of crude oil from Iran.
The market widely expected Washington to extend the waivers for five of the countries. However, sources say that any country still importing oil from Iran will be subject to U.S. sanctions beginning May 2.
The Trump administration will partner with Iran’s regional rivals Saudi Arabia and the United Arab Emirates to offset the drop in Iranian supplies, the White House said.
This may be less of a body blow than simply closing the loop. This apparently will only directly impact five countries that had been receiving waivers since the Trump administration reimposed sanctions on Iran’s oil output. Those five are economic powerhouses, though, and it might be difficult to enforce the change in policy considering other priorities for the administration.
Two of them are already in rocky relations with the US (China and Turkey), while the other three are strategic partners (Japan, South Korea, and India). At the very least, this will impact the trade talks with China, which has become a patron of Iran to some extent. It also might complicate strategy in dealing with North Korea. Turkey’s already spinning out of its NATO harness as it is, and India’s complicated relationships with Pakistan and China make their reaction difficult to gauge.
Iran won’t only look eastward for support, either. Politico’s Nahal Toosi reports that Iran will continue looking toward Europe to cushion itself against the economic damage:
Since taking office, Trump has pursued a sanctions-heavy strategy aimed at undermining the Islamist leaders in Iran. As part of that, Trump pulled the United States out of the Iran nuclear deal. He also recently designated Iran’s Islamic Revolutionary Guard Corps a foreign terrorist organization.
The Iranian government has denounced the sanctions. But, even as the sanctions have badly hurt its economy, Iran has stuck to its commitment under the nuclear deal to restrict its atomic activities, in the hopes that European partners can help it weather the U.S. blows.
It’s no secret that the EU is unhappy with Trump for pulling out of that accord. They’re no longer trading in Iranian oil (at least not officially), but they will see this escalation as particularly unwelcome. The odds of getting the sanctions band back together are slim indeed.