The United States on Monday demanded that buyers of Iranian oil, including India and China, stop purchases by May 1 or face sanctions, a move to choke off Tehran's oil revenues which sent crude prices to six-month highs on fears of a potential supply crunch. The Trump administration on Monday said it will not renew exemptions granted last year to buyers of Iranian oil, a more stringent than the expected decision that caught several key importers who have been pleading with Washington to continue buying Iranian oil sanctions-free. The United States reimposed sanctions in November on exports of Iranian oil after US President Donald Trump last spring unilaterally pulled out of a 2015 accord between Iran and six world powers to curb Tehran's nuclear programme. Here's what it means for the nations who were granted waivers from the sanctions. Images: AP, Reuters
The United States on Monday demanded that buyers of Iranian oil stop purchases by May 1 or face sanctions, a move to choke off Tehran's oil revenues which sent crude prices to six-month highs on fears of a potential supply crunch. Eight economies, including China and India, were granted waivers for six months, and several had expected those exemptions to be renewed.
The United States reimposed sanctions in November on exports of Iranian oil after US President Donald Trump last spring unilaterally pulled out of a 2015 accord between Iran and six world powers to curb Tehran's nuclear programme.
Traders, already fretting about tight supplies, raised scepticism about whether this more stringent approach, along with ongoing sanctions on Venezuela's oil industry, could backfire in the form of a major spike in prices.
US Secretary of State Mike Pompeo, in a briefing Monday, said: "We're going to zero across the board", adding that the US had no plans for a grace period for compliance beyond May 1. The White House intends to deprive Iran of its lifeline of $50 billion in annual oil revenues, Pompeo added.
Brent crude futures were at $74.40 per barrel at 0239 GMT, up 0.5 percent from their last close and not far off a 2019 peak of $74.52 reached on Monday. US West Texas Intermediate (WTI) crude futures hit their highest level since October 2018 at $65.95 per barrel before edging back to $65.89 by 0239 GMT, which was still up 0.5 percent from their last settlement.
Before the reimposition of sanctions last year, Iran was the fourth-largest producer among the Organisation of the Petroleum Exporting Countries (OPEC) at almost 3 million barrels per day (bpd), but April exports have shrunk well below 1 million bpd, according to ship-tracking and analyst data in Refinitiv.
While Italy, Greece and Taiwan already have halted purchases, doing so could prove much more challenging for China and India. Turkey, another buyer, has already slammed the US decision.
India said on Monday it is studying the implications of the US decision to no longer exempt it from penalties for importing oil from Iran. The US said it has decided that five major countries, including India, will no longer be exempt from penalties if they continue to import Iranian oil. "We have seen the announcement by the US Secretary of State. We are studying the implications of the decision and will make a statement at an appropriate time," sources said.
Geng Shuang, a Chinese foreign ministry spokesman, said at a daily news briefing in Beijing on Monday that it opposed unilateral US sanctions against Iran and that China's bilateral cooperation with Iran was in accordance with the law.
South Korea’s Yonhap news agency quoted the foreign ministry as saying the South Korean government had been negotiating with the United States at all levels to extend the waivers and that it would continue to make every effort to reflect Seoul's position until the May deadline.
Japan expects a limited impact from the US decision not to renew waivers it had previously granted on Iran oil import sanctions, trade and industry minister Hiroshige Seko said on Tuesday. Speaking at a regular press conference, minister Seko told reporters the Japanese government did not see any need to tap national oil reserves following the US decision. Japan, the world's fourth-biggest oil consumer, has been reducing its reliance on Iranian crude supplies. Iran now accounts for about 3 percent of purchases, Seko said.