IRAN SANCTIONS

The US's refusal to renew waivers for buying Iranian crude seems to have taken its toll on oil prices.

A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf, Iran. REUTERS/Raheb Homavandi


In late April, prices for a variety of crude oil types went up by as much as 2.8%, registering a six-month high. Each barrel of Brent crude oil was sold for USD74.04, while WTI was priced at USD65.70.

The spike did not come as a surprise: Mike Pompeo, US Secretary of State, had just announced during a press conference that sanction waivers for importing Iranian crude oil would not be renewed.

These waivers had been issued for South Korea, Turkey, India, Greece, China, Italy, Japan, and Taiwan following the introduction of a new series of US sanctions on Iran's oil exports in November, 2018.

The latest round of sanctions on Iran are designed by the Trump administration to put maximum pressure on the country by cutting off its most vital channel of revenue. An OPEC member, Iran had managed to raise its crude output to over 2.4 million bpd after the signing of JCPOA—also known as the nuclear deal—which Donald Trump pulled the US out of almost a year ago.

To avoid negative repercussions for third parties, however, a number of waivers were granted to major importers of Iranian crude oil with the introduction of sanctions in November, allowing them a transition period to find alternative suppliers.

The two EU members in the list along with Taiwan have stopped buying Iranian oil altogether, while Japan and Korea have effectively decreased their imports.

India, as a longtime customer of Iranian oil, has found alternative suppliers too, says Dharmendra Pradhan, India's Petroleum Minister.

China, and Turkey, on the other hand, were half-hoping for another extension, but Pompeo made it clear on Monday that a renewal of the waivers is out of the question.

The transition period for the holders of the waivers will end on May 2, and those countries and companies that continue to do business with Iran will be penalized by the US.

The spike in prices comes in spite of certain measures taken by the US and its allies in the GCC region. According to a tweet by Donald Trump, Saudi Arabia and the UAE have promised to compensate for Iran's curbed contribution to the market, keeping the supply and demand in balance.

Importers of Iran's oil, especially China and Turkey, are dismayed by the news and have voiced their criticism. Mevlüt Çavuşoğlu, Turkey's Minister of Foreign Affairs, says that his country does not support the US sanctions, adding that the sanctions have caused trouble for Turkey and other countries.

A spokesman of China's Foreign Ministry warned that the US's move will lead to an energy crisis in the Middle East and the world and repeated that Tehran-Beijing relations have always been within the framework of international laws and regulations.

Iranian authorities, meanwhile, have challenged the legitimacy of the sanctions imposed by the US, adding that the country will carry on exporting crude oil.

Whether the country will come up with a way to find customers for its oil under the shadow of US sanctions will become clear in the coming weeks and months, and so will the impact of the full-fledged sanctions on the global oil market.