Published: Mon, April 22, 2019
Markets | By Otis Pena

U.S. won’t renew sanctions waivers for nations using Iranian oil

U.S. won’t renew sanctions waivers for nations using Iranian oil

Secretary of State Mike Pompeo plans to announce on Monday that the administration will not renew sanctions waivers for the five countries when they expire on May 2, three US officials said.

"This decision is meant to bring Iran's oil exports to zero, denying the regime its principal source of revenue", the statement from White House press secretary Sarah Sanders read.

The move which is seen as an escalation of the US President Donald Trump administration's "maximum pressure" on Iran comes after it past year gave temporary 180-days waiver to eight countries, including India, China and Japan among others.

This story is breaking and will be updated.

Analysts criticised the end to the exemptions, which would hit Asian buyers the hardest.

Rear Admiral Alireza Tangsiri stated on Monday that if Iran is not allowed to export oil through the Hormuz Strait, it would react immediately.

A gas flare on an oil production platform in the Soroush oil fields, in Iran, on July 25, 2005.

India, Iran's biggest oil client after China, has nearly halved its Iran oil purchase since November. The statement said that the UAE and Saudi Arabia had agreed to "take timely action" to ensure that any gap in supply would be met. In anticipation of the move, crude oil prices rose 3 percent overnight.

On Wednesday, Frank Fannon, U.S. Assistant Secretary of State for Energy Resources, repeated the administration's position that "Our goal is to get to zero Iranian exports as quickly as possible".

U.S. oil sanctions that have been in force since May 2018 have taken off an estimated 1.5 million barrels of Iranian crude from the world market, denying Iran about $10 billion in revenues a month.

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In September past year, the United States outpaced Russian Federation and Iran to become the world's largest crude oil producer for the first time in almost two decades.

As a result of this decision, all countries including India would have to bring down its import of oil from Iran by May 2. The company is now waiting for an official response from the government on the waivers.

Zhang Huiyao, deputy general manager of crude at China's Huatai Futures, said "the news today caught refiners by surprise", but added that alternative "supplies from Russian Federation, U.S. shale, and Saudi could easily fill the gap".

"I expect India to fall in line with the sanctions", said Sukrit Vijayakar, director of Indian energy consultancy Trifecta.

South Korea's Hanwha Total Petrochemical, a buyer of Iranian ultra-light oil, has already been buying and testing alternative oil cargoes from regions such as Africa and Australia, said a company spokesperson who asked not to be identified because of internal policy.

Earlier in February Tangsiri had also threatened to close Hormuz, if Iran's oil exports dropped to zero.

President Donald Trump walks to speak with supporters after arriving on Air Force One at the Palm Beach International Airport to spend Easter weekend at his Mar-a-Lago resort on April 18, 2019, in West Palm Beach, Fla.

Nogami said he expected oil prices to rise further because of U.S. sanctions and OPEC-led supply cuts.

That is lower than at least 1.1 million bpd as estimated for March, and down from more than 2.5 million bpd before sanctions were reimposed last May.

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