US plans to bring Iran oil exports down to zero

Companies in countries doing business with Iran previously given a pass will be cut off from the US economy.

Iranian oil tanker 370 (photo credit: REUTERS)
Iranian oil tanker 370
(photo credit: REUTERS)
WASHINGTON – The US House of Representatives will vote next week on legislation aimed at slashing Iran’s ability to export any oil.
With 360 co-sponsors in the 435-member body, the bill will pass, and is expected to be matched in the Senate after Congress’s August recess.
The sanctions bill requests that the US president, under his authority provided by the International Emergency Economic Powers Act, come up with a strategy within two months to cut Iran’s remaining export sales of roughly a million barrels a day.
After a year, exemptions granted to countries such as China, Japan, Turkey and South Korea – which continue to import Iranian oil – will no longer be granted. Companies in those countries doing business with Iran previously given a pass will be cut off from the US economy.
American officials are confident there is spare capacity in the global market to replace Iran’s exports. Libya is back to producing oil since its revolution ended in 2011, and Saudi Arabia is prepared to accommodate Iran’s customers, with spare production capacity already at 2 million to 2.5 million barrels.
Previous US efforts cut Iranian oil exports by more than 65 percent, devastating the economy of the Islamic Republic.
Foreign officials and private industry leaders have been briefed on the language of the US bill.
China stands the most to lose: Iran remains its third-largest source of oil after Saudi Arabia and Angola, and the companies that facilitate that trade have major assets in the United States. PetroChina, China’s largest oil producer, is one such company listed on the New York Stock Exchange.
These Chinese firms, vocally opposed to extraterritorial sanctions and to taking orders from the United States, will have to decide within 14 months whether to have a business relationship with Iran or the US.
The House bill also targets other loopholes in the current sanctions regimen, including foreign exchange reserves that have allowed Iran to deal in euros. These exchanges over the past year have been primarily facilitated by Chinese banks. The bill attempts to strangle the banks’ ability to operate with foreign partners of the US. It also targets Iranian shipping with stricter inspection and flagging regulations.
The bill is a significant response to the election of incoming Iranian President Hassan Rouhani, who campaigned on a platform of reconciliation with the West. US officials and experts have questioned the authenticity of Rouhani’s intentions, and his ability to deliver, as Supreme Leader Ayatollah Ali Khamenei is still firmly in charge of decision- making on the country’s nuclear program.
While the sanctions will be harsh if and when executed, the timeline for their full implementation – a year from passage, likely in September or October – grants the Iranians another year or more to acquire nuclear weapons capability.
As one source close to the drafting of the bill conceded: If Iran chooses to press full speed ahead on uranium enrichment, no sanctions bill can stop it.