Secretary of State Michael Pompeo said the U.S. will grant eight temporary waivers for countries to keep importing Iranian crude after sanctions snap back on Monday, following President Donald Trump’s decision to quit the Iran nuclear agreement reached in 2015.
Waivers are being given only in cases where importers have made “important moves” toward shunning Iranian oil entirely, Pompeo told reporters on a conference call Friday with Treasury Secretary Steven Mnuchin. Two of those countries will reduce imports to zero but need time to get there, Pompeo said.
The decisions on waivers is part of the administration’s balancing act to get tough on Iran after Trump’s decision to back out of the nuclear deal while also trying to ensure that global oil prices don’t spike — especially with the U.S. midterm elections just a few days away. The administration wants to punish Iran so severely that it’s compelled to negotiate a permanent end to its nuclear ambitions as well as what the U.S. calls its “malign behavior” in the region.
“Our laser-focused approach has succeeded in keeping prices stable with a benchmark Brent price right about where it was in May of 2018, when we withdrew” from the agreement between Iran and six world powers that eased sanctions in return for curbs on the Islamic Republic’s nuclear program.
But Pompeo and Mnuchin have also had to fight a rearguard action against hard-liners in the administration including John Bolton. The national security adviser argued that the waivers — and a decision not to bar Iranian banks from the global Swift financial messaging system — were too generous toward Iran, according to a person familiar with the administration’s internal debate.
“We are intent on ensuring that global funds stop flowing to the coffers of the Iranian regime,” Mnuchin said on the call. He said Swift would be subject to sanctions if it handles transactions with “certain designated Iranian financial institutions.”
“We have advised Swift that it must disconnect any Iranian institution that we designate as soon as technologically feasible to avoid sanctions exposure,” the Treasury secretary said.
Ahead of Friday’s call, a senior administration official said Japan, India and South Korea were among those getting waivers. China — the leading importer of Iranian oil — is still in discussions with the U.S. on terms, but is among the eight, according to two people familiar with the discussions who also asked not to be identified. Others could include Taiwan and Turkey.
The European Union as a whole won’t get a waiver, Pompeo said.
In a joint statement on Friday, the EU’s high commissioner and the finance and foreign ministers from the U.K., Germany and France said they “deeply regret the further re-imposition of sanctions by the United States.” They said they will work “to protect European economic operators engaged in legitimate business with Iran,” including preserving “effective financial channels” and continuing “Iran’s export of oil and gas.”
Global benchmark Brent crude has fallen about 15 percent from over $85 a barrel last month on increasing speculation that at least some nations would get waivers, as well as signs that other OPEC members will pump more to offset any supply gap.
Banks, Shipping Targets
Trump’s decision to withdraw from the nuclear agreement infuriated Iran as well as the other countries that negotiated the deal and who still say it’s the best chance to constrain the Islamic Republic’s nuclear ambitions. But the U.S. has rebuffed them and gone ahead with its sanctions plan, arguing that nations, banks and businesses worldwide will decide they’d rather do business with the U.S. than Iran.
A White House statement released Friday said more than 700 “individuals, entities, vessels and aircraft” will be sanctioned. They include Iranian banks, shipping companies and oil exporters.
“This is a whole different level of escalation than what could have occurred,” said John Smith, who left Treasury in May as a civil servant leading the unit that issues and enforces sanctions and is now a partner at the law firm Morrison & Foerster. “The message that this administration has given around the world has been uncompromisingly tough and aggressive: It’s our way or the highway.”