United States hints at sanctions waivers on Iran oil exports

Administration’s policy on sanctions, oil supplies remain unclear

State Department official elaborated on recent discussions between US diplomats and their Saudi counterparts.

“In our meeting with the Saudi energy minister, we discussed maintaining a well-supplied oil market to guard against volatility,” the unnamed official told reporters in a background briefing.

“We coordinated — we discussed US oil sanctions to deny Iran revenue to finance terrorism. We talked about minimizing market disruptions and helping partners find alternatives to Iranian supply of oil,” the official added.

It remains unclear whether the latest comments from Pompeo about considering applications for waivers, and his unnamed briefer, represent a softening of the administration’s position.

Press briefings given earlier this month suggested that the administration’s goal was to reduce Iran’s oil exports to zero, possibly with effect from November.

“Our goal is to increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales,” a senior State Department official told reporters at a press briefing earlier this month.

“We are working to minimize disruptions to the global market, but we are confident that there is sufficient global spare oil production capacity,” Brian Hook, the director of policy planning, said on July 2.

“We are not looking to grant licences or waivers broadly on the reimposition of sanctions, because we believe pressure is critical to achieve our national security objectives.”

On the other hand, the administration has also briefed journalists on background it will review waiver applications on a case-by-case basis and work with countries that are reducing their oil imports from Iran (“US says to work with allies to cut Iran oil imports”, Reuters, June 28).

The current position seems to be that sanctions will definitely snapback on Nov. 4 but the United States will “consider” applications from “a handful” of countries to be allowed to continue importing some oil.

The compromise would ensure at least some Iranian oil continues reaching the global market, as it did under the previous sanctions in force between 2012 and 2015.

There are doubts about whether Saudi Arabia and other producers can increase output by enough to cover all the 2.4 million barrels per day of Iranian oil exports if sanctions attempted to push them to zero.

Waivers and exemptions allowing at least some Iranian barrels to continue being exported may be the only practical way to re-impose sanctions without risking a sharp spike in oil prices.

Price increases are especially sensitive at this time because the re-imposition of sanctions coincides with US congressional elections on Nov. 6.

Despite multiple briefings and statements by senior US officials, the administration’s policy on sanctions and oil supplies remains unclear.

The ambiguity may be intentional to increase pressure on Iran, but it is also maximising uncertainty in the oil market about future supplies and is likely to keep upward pressure on prices.

Traders, refiners and hedge funds have been left without a clear picture of how much oil will be available to the market towards the end of the year and into 2019.

Because the oil market is forwardlooking, uncertainty about supplies in the final quarter and next year is directly affecting prices now.

Market participants will be looking for clarity from the State Department on several key issues as they try to assess the severity of sanctions and oil availability. (RTRS)