The Trump administration moved Friday toward its goal of maximum economic pressure against Iran, while granting waivers allowing eight countries to temporarily import Iranian oil without facing U.S. punishment. The Trump administration called it the biggest sanctions action the United States had ever undertaken against Iran.
The waivers, to countries that government advisers say include China, Turkey and India, are designed to give them time to switch to other suppliers while sharply reducing or eliminating their purchases of Iranian oil over time.
But with the U.S. economic pressure campaign coming into full force at 12:01 a.m. eastern time Monday, American officials also struggled to plug the holes that have plagued past sanctions plans against Iran.
Unlike the global support for the Obama administration’s penalties, broad opposition to the current U.S. policy, including from European allies, is sure to complicate the task. And Iran has pledged to resist the sanctions.
Still, the Trump administration is off to a strong start: Iranian oil exports have fallen by more than a million barrels a day since the White House launched its new campaign in May. That decline represents more than a third of international sales.
Iran's economy, with oil accounting for 80% of tax revenue, is in pain. Europe’s largest companies have pulled out, and Iranian consumers rushed to exchange their trials, pushing the currency’s value to record lows and sparking a surge in consumer prices.
In March, the International Monetary Fund forecast Iran’s economy would expand by 4% in 2018. Now it predicts a two-year recession, with a 3.6% contraction next year.
What Iranian Oil Sanctions Could Mean for U.S. Pump Prices
The price of a tank of gas has been rising and coming U.S. sanctions on Iran mean drivers could be in for even more pain at the pump. But that’s not the whole story. WSJ’s Sarah Kent explains why global oil prices are on a knife-edge.
The Trump administration’s strategy to harden sanctions began with its decision in May to withdraw from the 2015 Iran nuclear pact, which triggered the reimposition of many sanctions while giving the U.S. leeway on how leniently or forcefully to apply economic pressure. An executive order issued by President Trump set Nov. 5 as the day the oil sanctions resume.
They prohibit purchases of Iranian oil, with companies facing sanctions unless the State Department grants waivers to their home countries.
U.S. officials didn’t name the countries receiving waivers on Friday. The government advisers said China, India and Turkey along with South Korea, Japan, the United Arab Emirates, Taiwan and Iraq are likely to receive waivers.
The Trump administration is seeking to surpass the success of the Obama sanctions, which led to the 2015 nuclear deal. After exiting from that deal in May, the Trump team said it wants a more comprehensive accord with Iran that not only prevents development of nuclear weapons, but also bans long-range missiles and curbs Tehran’s support for armed conflicts in Syria, Lebanon, Yemen and Iraq.
“History shows that this regime only changes its behavior and comes to the negotiating table when under significant pressure,” Mr. Hook said.
But Tehran isn’t completely isolated. Many of the world’s largest economies, including trans-Atlantic allies, opposed the Trump administration’s decision to pull out of the nuclear accord and reimpose sanctions. European governments and others have sought to preserve ties with Iran, in part an effort to ensure it stays in the nuclear accord. That global support for Tehran may give license to evasion.
“The dissatisfaction with the U.S. sanctions program is a silent encouragement for circumvention,” said Alma Angotti, managing director and co-head of the global investigations and compliance practice Guidehouse.
The European Union, despite a corporate exodus, wants to shield trade and finance with Iran from U.S. sanctions. Firms from China, Russia and elsewhere have remained in Iran.
As its aboveboard oil sales decline, Iran’s government is scrambling to keep selling surreptitiously, using techniques honed during the Obama pressure campaign, U.S. officials say: loading cargoes into non-Iranian vessels at sea, and turning off shipboard satellite beacons.
In recent months, Tehran has assembled a special sanctions-busting group, Iran experts say, with top officials from the oil, intelligence, export and foreign ministries and the Central Bank of Iran.
During the Obama-era pressure campaign, Tehran moved tens of billions of dollars-worth of oil, gold and other goods through banks, trading companies and exchange houses across the globe, including in Turkey and Dubai, one of the seven U.A.E. emirates. It is reactivating that infrastructure, U.S. officials say.