US President Donald Trump has withdrawn from the landmark Iran nuclear deal and vowed to reimpose sanctions against Iran, giving rise to fears of the impact the moves would have across economic sectors.
All of the Iran sanctions in place before the 2015 agreement are now officially back in force, banning any new deals with Iran. However, Mr Trump’s order sets 90- and 180-day time frames for companies with existing Iranian business commitments. By August or November, they will have to comply with a broad array of sanctions targeting the Iranian Central Bank and Iran’s financial sector, oil industry, shipping and other economic pressure points, reports Bloomberg. That could allow time to negotiate a new accord to replace or supplement the deal agreed to during Barack Obama’s presidency.
The first deadline is 6 August. By then, companies must wind down holdings of Iranian sovereign debt or Iranian currency. Any person or company that assists the Iranian government with acquiring or purchasing US dollar banknotes also will be subject to sanctions by that date.
Sanctions also snap back into place with effect from 6 August on Iran’s trade in gold and other precious metals, graphite and coal, metals such as aluminium and steel, the country’s automobile sector and luxury products such as Iranian-origin carpets and caviar.
Treasury Secretary Steven Mnuchin said in a briefing that companies can request waivers or special licences to avoid sanctions, and they’ll be determined on a case-by-case basis.
Sanctions targeting companies doing business with Iran’s oil industry are reinstated on 4 November, including penalties against foreign financial institutions that conduct significant transactions with the Central Bank of Iran.
The US will also impose sanctions on Iran’s energy sector and on petroleum-related transactions with firms including National Iranian Oil Company, Naftiran Intertrade Company, and National Iranian Tanker Company.
The US has advised countries that want to avoid sanctions on their financial institutions to reduce their volume of crude oil purchases from Iran during the 180-day wind-down period. The State Department will determine on a case-by-case basis whether countries have sufficiently cut their Iranian imports.
The Trump administration has vowed to enforce its new Iran policy by threatening to penalise any entity in breach of the sanctions programme, including potentially cutting off their access to US markets.
According to a survey by S&P Global Platts, reimposing US oil sanctions on Iran will likely have an immediate impact of less than 200,000 barrels per day (b/d) and will block less than 500,000 b/d after six months. But some analysts see the move eventually disrupting as much as 1 million b/d of oil supply.
Iran produced 3.83 million b/d in April, according to the latest S&P Global Platts OPEC survey, up from 2.91 million b/d in January 2016, when the nuclear deal took effect.
Iranian crude exports to Asia rose to 1.81 million b/d in April, making up 67% of its total exports, with China the largest single destination. Demand for Iranian crude in China and India is likely to remain very strong, though refiners in Europe, South Korea and Japan are likely to tread more carefully.
Saudi Arabia has pledged to help stabilise global oil markets in the wake of the Trump administration’s decision to reinstate economic sanctions on Iran.