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Trump takes aim at Iran’s oil

By Nick Wadhams, Glen Carey and Margaret Talev

Bloomberg

The Trump administration said it won’t renew waivers that let countries buy Iranian oil without facing U.S. sanctions, a move that roiled energy markets and risks upsetting major importers such as China and India.

“This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” White House press secretary Sarah Sanders said in a statement Monday.

“The U.S., Saudi Arabia and the United Arab Emirates, three of the world’s great energy producers, along with our friends and allies, are committed to ensuring that global oil markets remain adequately supplied,” according to the statement.

Brent Crude for June settlement climbed as much as 3.5 percent on Monday, reaching its highest level since early November.

It traded at $74.36 a barrel, up 2.4 percent, as of 9:36 a.m.

The current set of waivers — issued to China, Greece, India, Italy, Japan, South Korea, Taiwan and Turkey — expire May 2.

President Donald Trump believes enforcing the oil sanctions will not fundamentally affect trade or relations with China and Turkey, an administration official involved in the discussions told reporters Monday following the announcement. The president also thinks the move will not prompt Iran to leave the multilateral nuclear deal that the U.S. exited last year, said the official, who discussed the matter on condition of anonymity.

Trump said in a tweet that “Saudi Ara-

Trump


bia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil.”

The administration official said there is no additional wind-down period after May 2 and declined to say how the U.S. would respond to countries that already have oil orders with Iran that would be delivered after the waivers expire.

Tensions between the U.S. and Iran may escalate further. A senior Iranian military official threatened to block the Strait of Hormuz leading into the Persian Gulf, through which a fifth of the world’s traded oil is shipped.

“The Strait of Hormuz based on international law is a waterway and if we are prevented from using it, we will close it,” the state-run Fars news agency reported, citing Alireza Tangsiri, head of the revolutionary guards navy force.

The administration official wouldn’t say how the U.S. would respond if the Iranians move to close the strait.

Trump spoke with the crown princes of Saudi Arabia and UAE in the past 10 days to get their support, according to the official. The two nations agreed to make up for lost production at market prices, the official said, declining to say how long they had agreed to do so.

Iran said it’s holding talks with its partners in the region and beyond to contain the fallout from the move. The Foreign Ministry “is in continuous contact with the relevant domestic entities, and is having intensive consultations with many of its foreign partners including Europeans and neighbors,” the official Islamic Republic News Agency reported, citing the ministry’s spokesman, Abbas Mousavi.

Saudi Energy Minister Khalid Al-Falih said in a statement Monday that the kingdom will coordinate with other oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market “does not go out of balance.”

Secretary of State Mike Pompeo said the U.S., Saudi Arabia and UAE are “working directly with Iran’s former customers.” He told reporters that “We will no longer grant any exemptions — we’re going to zero” and any nation continuing to buy Iranian oil will face U.S. sanctions.

The decision not to renew the waivers is a victory for national security adviser John Bolton and his allies who had argued that U.S. promises to get tough on Iran were meaningless with waivers still in place. Pompeo and his team had been more cautious, though they also maintained that the market was wellenough supplied to ramp up pressure on Iran.

“The maximum pressure campaign could not be maximalist until the administration cut off Iran’s oil exports,” said Mark Dubowitz, the chief executive officer of the Foundation for Defense of Democracies and a supporter of additional sanctions on Iran. “With this decision, Iran’s economy will be under severe pressure as its hard currency earnings dry up and its foreign exchange reserves plummet.”

Trump’s efforts to cut Iranian supplies have rocked oil markets in the past year. After running up above $85 a barrel in anticipation of sanctions, oil plunged to near $50 in the last three months of 2018 as the administration unexpectedly granted the waivers.

The risk now is the decision could cause crude prices to spike just as Trump begins to gear up to campaign. His administration had been wary of doing anything that could push crude prices above $70 a barrel.

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