The Trump administration is working to provide alternative sources of oil to American allies that will be affected because of US sanctions on Iran, according to a senior administration official. In the Bush administration and during the Obama administration until the 2015 landmark nuclear deal with Iran, some US allies, including Japan, South Korea and India, were given waivers from sanctions related to Iranian oil imports.
But the US has told allies not to expect waivers as it boosts pressure on Iran. Instead, it is trying to find sources to replace the oil they would have got from Tehran. The statement comes two months before the second tranche of US sanctions on Iran are reimposed as a consequence of the decision by Donald Trump to walk away from the nuclear deal, in a move that has been heavily criticised by Iran as well as the European allies which negotiated the deal alongside the US. While France, Germany and Britain are looking for ways to keep the deal intact without the US, the American sanctions are making that more difficult. The US official said European companies were already leaving Iran because of the US approach. “The message for Europe is the nuclear deal failed and European companies are leaving Iran,” said the official. The Trump administration has demanded that all buyers of Iranian oil cut imports to zero.
While countries such as South Korea and France have stopped purchases altogether, India and China are still importing Iranian crude at lower levels. Iran’s exports have already fallen significantly, down at least 500,000 barrels a day since May to below 2m b/d, even before US sanctions against the country’s energy sector officially kick in from November. The International Energy Agency has warned that if Iran’s exports continue to fall, the oil markets could tighten drastically. Saudi Arabia and its allies inside and outside of Opec, such as Russia, have pledged to ramp up output to keep oil prices in check at the request of Mr Trump who is keen to ensure there is no impact on domestic fuel prices ahead of the midterm elections. But Brent crude, the international benchmark, is close to $80 a barrel as questions arise about how steep Iran’s oil export fall may be and how much Saudi Arabia, alongside other producers, will be able to escalate their production and exports.