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Iran Sanctions Waivers: The Devil Is In The Details

Iran

The U.S. Administration’s decision to grant waivers on its Iran sanctions has placated fears that legal Iranian volumes will completely disappear from global markets. For many weeks and months, it seemed that the Trump Administration would relentlessly push the sanctions through; however, in the end it prioritized midterm elections and a more gradual implementation of sanctions, (temporarily) marginalizing National Security Advisor John Bolton. In October, Iran exported or placed into floating storage 1.7-1.8 mbpd of crude, a number that left it roughly flat month-on-month and everyone expected the November export debacle. However, under the U.S. sanctions, the eight “constituencies” that were granted Significant Reduction Exemption (SRE) have the possibility to import up to 1.5 mbpd, making the sanctions whammy largely rhetoric. Yet the devil, as usual, is hidden in the details.

(Click to enlarge)

China and India were the largest markets for Iranian crude before the onset of sanctions and will remain such for the upcoming six months. More than 29 percent of all Iranian crude exports this year went to China and after November 4, Beijing’s share will increase to around 33 percent. India will remain the second-largest importer, taking up around one-fifth of the total, followed by South Korea which has had difficulties replacing South Pars condensate with other grades, forcing it to revert to Iranian volumes despite a weak naphtha market currently. It would be myopic to see the eight SREs as anything but diplomatic maneuvering – a commitment not to antagonize China and India too much, at the same time taking a poke at European nations that intended to run a joint campaign against Trump’s unilateralism. In fact, it is by no means a coincidence that the only EU countries to receive waivers are Eurosceptic outliers.

The chosen group of eight accounted for 80 percent of Iranian exports last year and 83 percent this January-October. Thus, the stated ambition to “bring Iran down to zero” seems to be off the agenda for now, or at least temporarily delayed until April 2019. The next round of U.S. sanctions does create a new modus vivendi, a more constrained and painful for Iran, yet allow for some breathing space. But let’s take a closer look.

1. China: allowed to import 0.5 million barrels per day.

China is expected to import around 0.5 mbpd in the upcoming months covered…




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