US stops sanction exemptions for countries buying Iran's oil
This way, however, Trump puts at stake some key relationships in a particularly sensitive momentEuropost
In an effort to further ramp up economic pressure on Iran and deprive the Iranian leadership of oil revenue, the Trump administration announced last week that it will not renew special waivers that have allowed Japan, China, India, Turkey and South Korea to import oil from Iran without running afoul of renewed US sanctions.
“We will no longer grant exemptions,” Secretary of State Mike Pompeo said, adding that current sanctions waivers to the five nations would expire on 2 May, clearing the way for American economic penalties against all companies or financial institutions that continue to take part in transactions linked to buying Iranian oil.
The Iranian economy is already reeling from sanctions that have also led to a shortage in critical medicine, and Iranian-backed militias have been forced to tighten their payrolls. So the audacious strike at Tehran’s lifeline is likely to affect the country even more. In response, it threatened to close the Strait of Hormuz, a move that would effectively sabotage the world economy.
Yet, the clampdown puts the US administration not only in direct conflict with Iran, but with country's oil customers and allies that are important to Washington in different ways, risking hampering important initiatives on trade and security.
Among all of the complications, one stands out. Iran’s largest oil buyer is currently China and it has been increasing its purchases this year, contrary to Trump administration demands that it gradually bring the imports to zero. By retracting its oil exemptions, the US is now encroaching on China’s energy security at a particularly sensitive moment as Washington is trying to strike an all-important trade deal with Beijing. The US also needs China’s help in controlling North Korea’s economy and subsequently - nuclear weapons development.
For the sake of choking off Iran’s economy, Trump's administration is also testing its relationship with South Korea and Japan, both of which are key partners in a policy to deal with North Korea. India is a also a growing ally and fellow NATO member and it depends on Iran as it imports four-fifths of the Iranian oil. Therefore, Monday’s decision could have an immediate effect on Indian financial markets, as well, if it causes oil prices to jump.
Turkish officials also insist that they could not cope with the US requirements, because the country "has a long border with Iran, we have cultural ties,” as stated by Ibrahim Kalin, a senior adviser to President Recep Tayyip Erdogan.
But for all of its complications with Washington, Saudi Arabia enthusiastically endorsed the end of the exceptions as it seems to be the big winner. The rise in global oil prices finance the kingdom’s budget and may attract international investors to its proposed initial public offering of Saudi Aramco, which has been delayed over the past year.
“Saudi Arabia will coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance,” said Khalid al-Falih, the Saudi minister of energy.
But some experts warned that relying on Saudi Arabia presents other threats to the stability of the Persian Gulf.