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Despite the fact that the U.S. is not looking to grant any waivers to Iranian oil customers when the current ones expire in early May, it shouldn’t be taken for granted that no waivers will be issued, according to the U.S. Special Representative for Iran, Brian Hook, and to analysts and an official with the previous U.S. Administration.
“We did not want to lift the price of oil, and we were successful doing that. So when the president left the deal it was trading at $74. When our sanctions went back into effect, and we had taken off a million barrels of Iranian crude, oil was at $72,” Hook said at Atlantic Council’s 2019 Global Energy Forum in Abu Dhabi on Saturday.
“So we had very carefully calibrated the balancing of our national security goals and our economic interests. We did not – the president was very clear that he did not want to cause a spike in oil, and so we granted eight oil exceptions – significant reduction exceptions. All of those countries demonstrated significant reductions in their purchases of Iranian crude that made them eligible for an exception,” Hook said.
“We are not looking to grant any waivers or exceptions to the import of Iranian crude,” U.S. Special Representative for Iran said.
However, asked about waivers, Hook replied “Well, I can’t preview that specifically.”
“All I can say is that we believe that a – that certainly when we have a better-supplied oil market then that puts us in a much better climate to accelerate the path to zero,” Hook noted.
While the U.S. Administration and many analysts believe that there will be a direct correlation between the U.S. Iran waivers policy and the price of oil at the time it has to decide, Amos Hochstein, the former international energy envoy who oversaw Iran sanctions under President Obama, told CNBC that “There will 100 percent be exemptions in May.”
According to Hochstein, the U.S. granted exemptions because it was unable to reach agreements with some of Iran’s largest oil customers to stop importing oil from Tehran and the Administration probably doesn’t want to sanction countries that would continue imports.
“The reason for that is if you don’t give an exemption and someone is importing, then you have to sanction them, and you probably don’t want to sanction them,” Hochstein told CNBC.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
However, there is a reasonable probability that the Trump administration may renew the waivers or issue new ones if for no other reason than to use them as a fig leaf to mask the fact that their zero exports option is out of reach and that the sanctions have so far failed to cost Iran the loss of even one single barrel of oil. On the contrary, Iran’s oil exports and its oil revenue have both improved despite the sanctions as confirmed by Iranian President Rouhani and the Iranian Central Bank respectively.
Moreover, 95% of Iran’s oil exports estimated at 2.125 mbd go to China (35%), India (33%), the EU (20%) and Turkey (7%). The remaining 5% go to Japan and South Korea.
If the waivers weren’t renewed or new ones issued, it will mean that only 5% of Iranian crude imports by Japan and South Korea may not materialize. However, China, India and Turkey have been significantly increasing their purchases of Iranian crude thus offsetting that possibility.
The Trump administration is deluding itself if it believes that it can achieve its zero exports option. Moreover, it is equally deluding itself if it credits itself with the steep decline in oil prices. The slump in oil prices from the end of October to the end of 2018 was mainly caused by two factors.
The first is the realization by the global oil market that sanctions against Iranian oil exports have failed to cost Iran any loss of its oil exports despite projections that Iran could lose between 500,000 barrels a day (b/d) and 1.5 million barrels a day (mbd) and therefore there will not be a supply deficit.
The other factor is Saudi Arabia’s wrong decision (under pressure from President Trump) and Russia’s (for reasons of its own) to jointly add 650,000 b/d to the market in June thus widening an already-existing glut.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London