Washington is considering the addition of more sanctions against Iran and these could be announced next month, a government official who wished to remain unnamed told Reuters.
"We just want a continued chilling effect," the source said. "We want businesses to continue to think doing business with Iran is a terrible idea at this point," he added, saying the new sanctions will target new, as of yet unsanctioned sectors of the Iranian economy.
As regards the waivers Washington granted eight Iranian oil importers last November, the official repeated the adage that we've been hearing from pretty much everyone in the administration speaking to the media: the goal to bring Iranian oil exports to zero remains the ultimate goal. Extension of the waivers may not be granted even though some importers including India are already negotiating such extensions to keep the flow of cheap Iranian crude coming in.
According to the official who spoke to Reuters this week, U.S. crude oil will help plug the hole left by Iranian crude on the international markets, but this is doubtful price-wise: U.S. crude, for geographical and consequently transportation reasons, is costlier than Iranian crude and likely to remain so in the observable future.
This, however, does not mean it is not being bought. South Korea, for one, turned into the biggest buyer of U.S. crude this year despite being granted a sanction waiver. India, however, will be hard pressed to switch from Iranian to U.S. crude: it depends on exports for more than 80 percent of its oil consumption and at this level of import dependency, every cent matters, especially for an emerging economy.
Despite Washington's insistence on the zero Iranian oil exports, most analysts seem to agree that at least five importers will get a waiver extension, including South Korea, China, India, Japan, and Turkey. This would mean Iran will be-officially-exporting 1.1 million bpd next month.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
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 have failed and also the fact that the zero exports option is a bridge too far.
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, China, India and Turkey have increased their purchases taking advantage of discounts offered by Iran. 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.
US crude oil will not be needed to help plug a so-called hole left by Iranian crude on the international markets since no hole so far exists. The United States should put its oil production to better use, namely reducing its foreign oil imports estimated at 9 million barrels a day (mbd.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London