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U.S. To Slap Sanctions On All Iranian Oil Buyers

Washington

The United States intends to impose sanctions on all customers of Iranian oil, including China, the EU, and Russia, Treasury Secretary Steven Mnuchin said on Thursday, signaling that the U.S. will be working to cut off Iran’s access to the oil market.

“It is our intent to enforce sanctions on Iran-related-oil against everybody, including China,” Secretary Mnuchin said in his testimony before the House Financial Services Committee.

Oil prices jumped two weeks ago, after the U.S. said that it would look to get Iranian oil exports “down to zero” when sanctions return in early November. The U.S. also said that it may refuse to issue waivers, but later clarified that position saying that it would “work with those countries importing Iranian crude oil to get as many of them as possible down to zero by Nov. 4.”

“We are prepared to work with countries that are reducing their imports on a case by case basis. We are serious about our efforts to pressure Iran to change its threatening behavior,” a State Department official said two weeks ago.

Secretary Mnuchin’s Thursday comments are the clearest sign yet that the United States plans to seek drastic a reduction of Iranian crude oil exports by imposing sanctions on those who continue to buy Tehran oil after the U.S. sanctions return.

Earlier this week, a Senior State Department Official said that U.S. State Department officials had visited Saudi Arabia to coordinate stronger pressure on Iran and discuss ways to ensure that the oil market is well-supplied after U.S. sanctions on Iran’s oil kick in.

Related: Spare Capacity: The Biggest Mystery In Oil Markets

The tough U.S. line on Iran’s oil exports has had analysts raise their oil price forecasts, predicting that more oil will be removed from the market at a time when global spare capacity is shrinking as Saudi Arabia and Russia opened the taps to compensate for supply disruptions elsewhere and to cap upsides in oil prices that could destroy demand.

Last week, Morgan Stanley lifted its forecast for Brent Crude by $7.50 to $85 a barrel for H2 2018, while Bank of America warned that a complete cut-off of Iran’s oil could result in oil prices jumping to more than $120 a barrel.

By Tsvetana Paraskova for Oilprice.com

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  • Uncle Sam on July 15 2018 said:
    Dr. Salameh, the overwhelming majority of nations have no comparative advantage to trade with the USA. The USA can be self sufficient in most manufactures and resources. Exceptions that come to mind are copper, nickel, zinc, cobalt, lithium.

    Hence the USA does not care what the overwhelming majority of nations think. They can continue their impoverished existence without USA help.
  • Zephir on July 13 2018 said:
    China imports Iranian oil in lieu of US oil. China is in for a world of hurt. Sanctions usually mean banks trading oil lose their ability to trade dollars. The Chinese yuan is heading to worthless. A bank without dollar privileges is not a bank.
  • Mamdouh G Salameh on July 13 2018 said:
    The overwhelming majority of nations of the world including US allies are against the principle of US sanctions in general and particularly the sanctions on Iran. They resent the tendency of the United States to slap sanctions on any country with which it doesn’t see eye to eye. Countries of the world are not going to comply with US sanctions against Iran and would challenge the US to impose sanctions on them.

    The US is building great hopes on Saudi Arabia to offset any shortfall in Iranian oil exports as a result of US sanctions. This is not going to happen because the sanctions will have no impact on Iranian crude oil exports. The petro-yuan has nullified the effectiveness of the sanctions.

    Furthermore, Saudi Arabia and Russia combined could not add more than 600,000 barrels a day to the global oil supplies.

    President Trump is behaving like one who thinks he owns the world. He has antagonized the world with his discredited “America first” policy and has so far achieved nothing for America.

    The United States seems to be in a very angry mood against the whole world with its most vehement anger directed against China and Russia.

    The US alienation from both China and Russia is reflected by the deeply rooted fear of the US losing hegemonic status as the “only indispensable superpower”. The indications of the US fear are plenty. From Beijing’s point of view, it is the brewing trade war against it and the United States’ inability to reconcile itself with the fact that China’s economy is now the world’s largest and that the petro-yuan is starting to undermine the petrodollar which is the core of the US financial system.

    From Russia’s perspective, it is the US resentment of the strategic Chinese-Russian relationship and the failure of US sanctions against Russia.

    If President Trump continues his policy of antagonizing everybody, his legacy will be a global economy hovering on the verge of collapse and possibly a war with China and an America looked upon as a bully and hated by the overwhelming nations of the world.

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

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