Trump Ends Sanction Exemptions for Iranian Oil
On Monday, April 22nd, President Donald Trump and Secretary of State Mike Pompeo took a major step in ratcheting up oil sanctions against the nation of Iran.
In a press release by the U.S. Department of State, the Trump administration detailed how it would be ending a series of exemptions given to some of Iran's largest oil importers, including the nations of China, India, and Turkey, in a final move to cripple the economy of the Persian nation.
In President Trump’s initial announcement of sanctions against the Iranian State in November of 2018, 8 nations (China, India, South Korea, Italy, Greece, Taiwan, Japan, and Turkey) were given waivers from the United States and were permitted to continue to import crude oil from Iranian sources. These exemptions were originally provided for a multitude of reasons, but mainly because each of these countries had a heavy reliance on Iranian oil and could have faced serious economic consequences had they not been given time to find alternate energy importations.
Secretary Pompeo called the the ending of these exemptions part of a continuing effort to build, “maximum pressure... to get Iran’s oil exports to zero and deny the regime the revenue it needs to fund terrorism and violent wars abroad.”
If the importation of Iranian oil is halted across the board, the implications for Iran could be dire. Oil sales make up over 40% of government revenue in Iran and play an important role in funding both their domestic military forces, such as the Revolutionary Guard, as well as proxy forces which operate across the Middle East like Hezbollah and the Syrian Arab Army. It is the hope of the White House that economic sanctions will lead to political and social turmoil in Iran, prompting a regime change or concessions from the reticent state.
However, the end of waivers is a risky choice for both economic and diplomatic reasons. The vast majority of countries which the U.S. awarded waivers are close allies of America and have expressed some measure of support for the sanctions. However, other countries, especially China, India, and Turkey have expressed that they not only disagree with the U.S. choice to end the waivers but may continue to import oil from Iran in spite of U.S. demands.
China especially cannot afford to end its trade with Iran, from whom it receives over 6% of its annual oil imports. Chinese Foreign Ministry spokesperson Geng Shuang said, “China opposes the unilateral sanctions...our cooperation with Iran is open, transparent, lawful and legitimate, thus it should be respected.”
The issue of waivers is likely to become a major point of contention in the coming months as wider trade negotiations are set to occur between the U.S. and China. It is likely that China will take a hardline stance and refuse to make any sort of agreement unless the U.S. allows them to continue their trade with Iran, hampering future diplomatic relations.
In addition, questions have been raised about the ability of the global oil markets to cope with the exclusion of Iran from the global economic community. The Trump Administration has claimed that through talks with Saudi Arabia and the United Arab Emirates any issues with possible increases in oil prices have been solved and that OPEC countries will increase their supply.
However, worldwide oil production is already being squeezed due to economic tensions in Venezuela, and some experts have predicted that oil prices will take a significant jump. As a possible confirmation of this belief, a barrel of crude reached a 74$ on Monday, the highest price since November of last year.
Only time will tell how successful this new sanction effort will be against the Iranian government, and if other countries will choose to go against the will of the U.S. and continue to import Iranian oil. What is clear is that Iran is still defiant and unremorseful in the face of American Pressure. The Supreme Leader of Iran, Ayatollah Ali Khamenei declared on twitter, “what (our) enemies do against the Islamic Republic & Islamic Ummah are their last resorts. The sterner they become, the stronger our willpower gets. The more they intensify measures, the stronger we become.”