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Julianne Geiger

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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U.S. Squabbles Over New Iran Sanction Waivers

Kharg Island Oil terminal

US sanctions on Iran’s oil sector and the waivers of said sanctions are causing rifts among the US administration—pitting the National Security Council and the US State Department against each other as the deadline for waiver extensions draws near.

US President Donald Trump is caught in the middle of the now-public squabble, as anonymous sources “familiar with the debate” disclosed the infighting to the media, according to Bloomberg.

Many others, too, have publicly decried the extension waivers or the sanctions, including oil-dependent economies that have long relied on Iran’s oil such as India, South Korea, Taiwan, Japan, China, and others—some of which enjoy peaceful relations with the United States.

President Trump campaigned heavily on scrapping the nuclear deal with Iran, and made good on that promise in May 2018. A few short months later, he announced that the United States would levy sanctions on Iran in a move that while somewhat predictable, shocked oil markets nonetheless. Prices rose on the announcement, but later fell when Trump announced in November that the United States would grant some of Iran’s most oil-thirsty customers waivers to continue purchasing specific amounts of oil from Iran.

The US administration granted said waivers after finding itself in quite the pickle, weighing the pros and cons of being tough on Iran, appearing tough on Iran, keeping a lid on oil prices, and keeping the peace with the likes of India, Japan, South Korea, and other US allies who would find it hard indeed to comply with zero oil purchases from Iran.

When Trump announced the sanctions, many were expecting him to stick to his hardline approach, and were unhappy with his decision to offer waivers to so many countries—eight in total—and oil prices plummeted as the market predicted global inventories would no longer be drawn down as quickly as they had planned. Related: A “Perfect Coup’’ Is Unfolding In Algeria

The issue with sanctions on Venezuela and Venezuela’s already-declining oil production added another level of complexity to the oil markets and to the decision about just how much of a hardline approach is too much, and how much is not enough.

This complexity is precisely why we are seeing divisions now, with another decision soon to be made on extending those waivers.

According to the sources, the group taking a hardline approach favoring no more waivers includes the National Security Council—John Bolton specifically. Other hardliners include presidential advisor Larry Kudlow, and Republican Senator Ted Cruz. Their argument is that Iran is not being squeezed tightly enough, and that it may be able to withstand the incomplete nature of the US sanctions, and that as a result, it may be unmotivated to make concessions to forge a new nuclear deal.

The opposing group is made up of the US State Department led by Mike Pompeo, who is in favor of treading more carefully with US allies who will feel the pinch if the waivers are not extended.

Waivers or no, Iran has seen a drop off in its oil production, despite the Iranian government’s insistence that the US sanctions would have little effect on its oil industry. Using OPEC’s data from secondary sources, we can see that Iran’s oil production has dipped by more than 1 million bpd since the re-imposition of the sanctions, even with the waivers granted to some of Iran’s largest customers.

Related: Venezuela’s Oil Production In Jeopardy After New Blackout

Canceling the existing waivers—the move toward zero exports—would shave off a great deal more.

The US has engaged in some chest-puffing with regards to “zero exports” out of Iran, but sober-minded individuals should see the folly in the likelihood of that absolute term, wisdom aside.


Chances are that the reality of what’s to come will be found in some middle ground, with Trump axing or reducing some waiver limits while keeping others. When oil markets react to the decision—whatever it is—it will be, similar to last time, short-term. With more oil barrels out of the mix, especially with Venezuela’s exports dwindling as well, oil prices will likely spike. Fears will be quickly assuaged, however, as Saudi Arabia and the rest of OPEC, and even non-OPEC members, have the capacity to restore oil production well beyond current levels, which is an artificially reduced level designed to shave barrels off what it sees as an oversupplied market.

This perceived oversupply will drive Trump’s decision in the coming days. The current round of waivers expires in May, and prices are expected to remain volatile at least until then.

By Julianne Geiger for Oilprice.com

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  • Steven Conn on March 27 2019 said:
    Turkey has and will continue to buy Iranian oil, as will China. Russia has been using oil-goods arrangement with Iran and Moscow-led Eurasian Union has signed a free trade zone with Iran. Meanwhile the pretense show about"granting sanctions or else" continues. None of these countries care very much about waivers or permissions. Lets be honest.
  • Mamdouh Salameh on March 28 2019 said:
    The claim that Iran’s crude oil production has declined by 1 million barrels a day (mbd) is not correct since the information comes from secondary sources using what is claimed to be OPEC data. If this is the case why not get your data from OPEC directly. Moreover, Iran like many members of OPEC sometimes provides misleading information about its exports and production to the OPEC secretariat for reasons of their own including the fact that Iran sometimes alters the documentation of its oil cargoes to confuse the Americans and it has so far been very successful in its endeavours.

    Moreover, even if hypothetically there was a reduction in Iran’s oil production it doesn’t automatically mean that its exports will decline. Iran like Saudi Arabia bolsters its exports by drawing on their stored crude oil without having to raise their production.

    What matters in the final analysis is that US sanctions have yet to cost Iran the loss of even a single barrel from its exports. China (35%), India (33%), the EU (20%) and Turkey (7%) accounting for 95% of Iranian oil exports haven’t reduced their purchases of Iranian crude. On the contrary, they have been buying Iranian crude in increasing amounts particularly China, India and Turkey because of discounts. The remaining 5% is bought by Japan and South Korea under sanction waivers. Furthermore, these major buyers with the exception of Japan and South Korea will continue to buy Iranian crude with or without waivers.

    The Trump administration has no alternative but to renew the sanction waivers it issued last year to the eight biggest buyers of Iranian crude when they expire in May or issue new ones for no other reason than to use them as a fig leaf to mask the fiasco that US sanctions are have failed and also the fact that the zero exports option is a bridge too far.

    So John Bolton the National Security Adviser to President Trump can continue barking up the wrong tree to his heart’s content but it will have no effect on Iran’s oil exports.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • ahmad ghamsari on March 28 2019 said:
    The decision of president Trump has realation to that second. Let me explain it. Many scientits and engenieers say the U.S shell output will drop soon this is mean higher oil price and means president Trump can't get enough votes for next election but this is also means paradise time for saudi arabia because the heavy military budget of saudi can only pay with 80 $ per barrel. In this case of course a country like Iran with no nuclear weapon is more peacful than a country like Pakistan. Also Iran has 82 million population .For iran this means huge number of humans asking for cheap food medician and... For U.S. , China , Japan and others means a huge non_weapon market in comparison with 30 million saudi arabia or 10 million UAE or 2 million Qatar. That plan was president Obama plan. After JCPOA Iran bought 100 plane from boeing and 150 from airbus . Also rich arabs will not buy pegeuot or renault . They will buy the most expensive cars and goods but in low number . Iran is the big market . Trump stay until price is very high or Iran regime collapse but with the news of dropping output I think he takes more chance to waivers especially when Iran can't move its income from bank to another bank so iran should export oil to a country and import from that country

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