Trump to Sanction Allies Over Iran Oil, Causing New Friction

The United States said Monday it would start imposing sanctions on friends such as India that buy Iranian oil, in its latest aggressive step to counter Tehran that could jeopardize U.S. relationships.

One targeted country, Turkey, vowed to defy the U.S. demands which sent global crude prices spiraling higher, although President Donald Trump tweeted that his close ally Saudi Arabia would “more than make up” for decreases in Iranian oil.

Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil. Iran is being given VERY BAD advice by @JohnKerry and people who helped him lead the U.S. into the very bad Iran Nuclear Deal. Big violation of Logan Act?

— Donald J. Trump (@realDonaldTrump) April 22, 2019

In seeking to reduce Iran’s oil exports to zero, the Trump administration is targeting the country’s top revenue maker in its latest no-holds-barred move to crush the economy and scale back the clerical regime’s influence.

“The Trump administration and our allies are determined to sustain and expand the maximum economic pressure campaign against Iran to end the regime’s destabilizing activity threatening the United States, our partners and allies and security in the Middle East,” the White House said in announcing its move.

Eight governments were initially given six-month reprieves from the unilateral sanctions on Iranian oil imposed last year by the United States.

They include India, which has warm ties with Washington but disagrees on the U.S. insistence that Iran is a threat. New Delhi has been working with Iran on a seaport in hopes of circumventing Pakistan, home to virulently anti-Indian militants.

Other countries that will be affected include China and Turkey, opening up new friction in contentious relationships if the United States goes ahead with sanctions over buying Iranian oil.

“We do not accept unilateral sanctions and impositions on the issue of how we will establish relations with our neighbors,” Turkish Foreign Minister Mevlut Cavusoglu said in response to the announcement, which he said “will not serve regional peace and stability.”

The #US decision to end sanctions waivers on #Iran oil imports will not serve regional peace and stability, yet will harm Iranian people. #Turkey rejects unilateral sanctions and impositions on how to conduct relations with neighbors. @StateDept @SecPompeo

— Mevlüt Çavuşoğlu (@MevlutCavusoglu) April 22, 2019

Secretary of State Mike Pompeo insisted that the United States would punish countries that buy Iranian oil after May 2, without spelling out the scope of the sanctions.

“We’ve made clear — if you don’t abide by this, there will be sanctions,” Pompeo told reporters. “We intend to enforce the sanctions.”

The others — Greece, Italy, Japan, South Korea, and Taiwan — have already heavily reduced their purchases from Iran.

South Korea’s foreign ministry said in a statement it was consulting with the United States and would do its “utmost” until next week’s deadline.

What’s Next

Trump last year withdrew the United States from an accord negotiated by his predecessor, Barack Obama, under which Iran drastically reduced its nuclear program in return for promises of sanctions relief.

Pompeo said the United States would keep raising pressure until Iranian leaders come back to the table, although he appeared little concerned with wooing them, saying he was making his demands to “the ayatollah and his cronies.”

The Iranian foreign ministry said the U.S. sanctions were “illegal” from the start.

Trump’s tough Iran policy has already alienated close allies, with the Europeans supporting the 2015 accord — with which U.N. inspectors say Iran is complying — and setting up a way for their businesses to evade U.S. sanctions.

A key backer of Trump’s push is Israeli Prime Minister Benjamin Netanyahu, who hailed the latest move as “of great importance.”

Just two weeks ago, Trump took another key step by designating Iran’s elite Revolutionary Guards — who are in charge of preserving the regime and have amassed vast commercial interests — as a terrorist group, the first time such action has been taken against part of another government.

Iran earned $52.7 billion from petroleum exports in 2017, according to the oil cartel OPEC, before the reimposition of US sanctions.

Experts say it is unlikely that Iranian exports will ever be reduced completely to zero, with a black market likely to exist.

US continues to choke Iranian oil exports.This in sharp contrast with Iran Deal policy of engagement supported by the rest of the world. Sanctions are self defeating if not coupled with incentives and dialogue. At a minimum they would harden positions and hurt civilians.

— Mohamed ElBaradei (@ElBaradei) April 22, 2019

Oil Prices Rise

Oil prices jumped overnight on reports of the action by the United States.

U.S. benchmark West Texas Intermediate for May delivery went up another 2.7 percent to $65.70 a barrel by mid-morning in the United States.

Backing Trump’s comments, Saudi Arabia’s Energy Minister Khalid al-Falih said that the kingdom would work to “stabilize” the oil market.

Energy-hungry India stands to be among the most affected by the decision and is also facing U.S. pressure not to buy from Venezuela, where Trump is seeking to topple leftist President Nicolas Maduro.

Oil jumps as U.S. plans to end Iran waivers after May 2 expiry https://t.co/N621nvEXbe pic.twitter.com/wH2Ocqf7wl

— Bloomberg (@business) April 22, 2019

According to Indian commerce ministry data, oil imports from Iran in the 10 months to January rose 16.3 percent to 21.3 million tonnes — although they have declined since the initial U.S. sanctions announcement.

Trump’s move has also been good for U.S. business, with India’s oil purchases from the United States skyrocketing 350 percent from 2017 to 2018.

The United States still has an exemption in place until mid-June for Iraq, which relies on electricity from its neighbor to cope with chronic blackouts that have triggered unrest.