Official: U.S. pressing allies to end Iran oil imports
The U.S. is pressing allies to end all imports of Iranian oil by a Nov. 4 deadline and doesn’t want to offer any extensions or waivers as it follows through on President Donald Trump’s decision to quit the 2015 Iran nuclear deal, a State Department official said.
Oil prices surged more than 2.5 percent in New York as traders digested the prospect of a much larger than expected loss of Iranian supply this winter. U.S. benchmark West Texas Intermediate surged to $70 a barrel, while Brent, the European crude benchmark, climbed to $76 a barrel.
In a briefing Tuesday, the State Department official said that while the administration wouldn’t rule out waivers or extensions to the November deadline — which Trump announced when he withdrew from the Iran deal in May — it isn’t discussing them, either.
Because U.S. allies from Asia to Europe have closer commercial ties to Iran than does America, many analysts expected some flexibility from Washington through waivers.
When Trump announced the U.S. was quitting the nuclear accord, he warned that other nations would face sanctions unless they stopped trading with the Iran. The 2015 agreement called for Iran to curb its nuclear program in return for the easing of sanctions, with the U.S., the U.K., France, Germany, China and Russia.
The official, who spoke on condition of anonymity, said the U.S. was planning conversations with the governments of Turkey, India and China, all of which import Iranian oil, about finding other supplies. The official said an important part of those discussions was making sure countries aren’t “adversely affected” by cutting Iranian oil imports.
Iran had seen rising prices and a weakening of its currency, the rial, even before Trump’s withdrawal decision, which was opposed
by European allies as well as Russia, China and the United Nations. Last week, Iran banned the import of 1,400 foreign non-essential and luxury goods to reduce the amount of foreign currency leaving the country.
Illegal trade has persisted as Iranians seek sanctuary in foreign currency. Some official Iranian news sites reported that the dollar was selling for almost 80,000 rials last week, compared with 60,000 rials in April, according to the semi-official Tasnim News, which cited trade on the unofficial, illegal markets.
Trump has said staying in the 2015 nuclear accord went against U.S. national security interests, as he criticized Iran for continuing its ballistic missile program and for supporting conflicts in places such as Yemen and Syria.
Iran exported about 2.4 million barrels a day of crude oil in May, with Asia buying about two thirds of the total and Europe the rest, according to the International Energy Agency.
Iranian exports dropped to about 1.0-to-1.5 million barrels a day during the 20132015 period of strong U.S. and European economic sanctions.
Total Iranian exports dropped to about 1 million to 1.5 million barrels a day during 2013-2015, before the nuclear deal was reached and the country was under strong U.S. and European economic sanctions.
The loss of a large chunk of Iranian oil exports will tighten the market significantly more than expected, even if Saudi Arabia boosts its own production to a record high of 10.8 million barrels a day.
Riyadh is already offsetting multiple output losses from Venezuela to Libya to Canada.
Saudi Arabia has a maximum production capacity of just above 12 million barrels a day, according to the International Energy Agency. If Iran exports drop more than 1 million barrels a day, Riyadh is likely to have to pump at maximum capacity for the first time since the late 1960s.
“If Saudi Arabia can not offset the loss of Iranian oil, then Washington could always tap into its Strategic Petroleum Reserve. So could China,” said Jan Stuart, an oil economist at consultant Cornerstone Macro in New York.