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Mnuchin: Washington Will Insist On At Least 20% Iran Oil Import Cuts

U.S. Treasury Secretary Steven Mnuchin warned this weekend that countries importing Iranian crude that want to continue importing it will need to reduce their intake of Iranian crude by more than 20 percent to win a sanction waiver. In an interview with Reuters, Mnuchin also said “Oil prices have already gone up, so my expectation is that the oil market has anticipated what’s going on in the reductions. I believe the information is already reflected in the price of oil.”

The 20-percent reference number is the reduction in Iranian oil imports that the Obama administration required in the previous round of sanctions to provide waivers. Mnuchin did not say exactly how deep the cuts would need to be now, saying only that he “would expect that if we do give waivers it will be significantly larger reductions.”

The official also said he was confident of the success of the zero-import policy pursued by the Trump administration. “I don’t expect we will get to zero in November but I do expect we will eventually get to zero,” he told Reuters. “There have been already very significant reductions in advance of this date.”

Japan and South Korea are the two countries that stopped importing Iranian crude ahead of the sanctions, which enter into effect in two weeks. Yet China, at the same time, has taken in a lot more than usual, part of it probably shipped to the Dalian port for storage.

In its push against Iran, Washington has also turned to SWIFT, the cross-border transaction settlement service. Mnuchin said that the United States is in negotiations with the company to cut Iran out of its network. Washington tried to get SWIFT to cut out Tehran back in 2012 as well.

“I can assure you our objective is to make sure that sanctioned transactions do not occur whether it’s through SWIFT or any other mechanism. Our focus is to make sure that the sanctions are enforced,” Mnuchin said.

By Irina Slav for Oilprice.com

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  • Mamdouh G Salameh on October 22 2018 said:
    US Treasury Secretary Steven Mnuchin knows that US sanctions against Iran’s oil exports are doomed to fail miserably. That is why the Trump administration has been back tracking from its drastic zero imports to allowing other purchasers of Iranian crude to get US sanctions waivers provided they cut their imports by at least 20%.

    And while Japan and South Korea may have halted their purchases of Iranian crude oil in compliance of US sanctions, they will resume their purchases soon once they have got US sanction waivers. Yet, China, at the same time, has taken a lot more of Iranian crude thus more than offsetting Japan’s and South Koreas’ purchases. Iran is reported to have shipped an estimated 20 million barrels of Iranian crude to China. Moreover, India’s purchases from Iran jumped from 390,000 b/d in August to 600,000 b/d in September.

    US sanctions against Iran are doomed to fail miserably and Iran will not lose a single barrel from its oil exports. My reasoning is based on the following market realities.

    The first reality is that the overwhelming majority of nations are against US sanctions in principle and against Iran in particular as unfair since Iran has not violated the terms of the nuclear deal.

    The second reality is that the petro-yuan has made the US sanctions useless and has provided a way by which Iran could bypass the petrodollar and the sanctions altogether. Even the Swift, the cross-border transaction settlement service, will prove futile as buyers of Iranian crude can pay for their purchases by barter trade, national currency exchange agreements and the petro-yuan.

    The third reality is that China which has been subjected to intrusive US tariffs against its exports to the US and Russia which has been battling harsh US sanctions since 2014 will ensure the failure of the US sanctions against Iran.

    The fourth reality is that China could singlehandedly nullify US sanctions altogether by importing the total Iranian oil exports amounting to 2.2 mbd and paying for them in petro-yuan.

    The fifth reality is that 95% of Iranian oil exports go to China (35%), India (33%), the European Union (20%) and Turkey (7%) which have already declared that they are not going to comply with US sanctions. The remaining 5% goes to South Korea and Japan which have already applied for US sanction waivers and they will get them.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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