US push displeasing to buyers of Iran oil: WSJ

Tehran, June 11, IRNA – Trump administration’s effort to pressure Iran depends on countries deeply skeptical of the US campaign against Iran creating resistance that analysts and officials in those countries say could undercut one critical element of the push: curtailing Iran’s oil exports.

'The renewed US targeting of Iran’s economy comes after President Donald Trump withdrew the US last month from a landmark deal in which Iran limited its nuclear program in return for the restored business and financial ties with the rest of the world. The other parties to the accord—including the European Union and China, which have begun developing extensive dealings with Iran—opposed the US withdrawal and are trying to maintain the deal,' wrote Wall Street Journal on Sunday.

WSJ wrote, 'Iran came to the negotiating table in 2015 only after its most reliable customers had slashed their oil purchases across the board. European buyers cut back aggressively and voluntarily. Japan and South Korea, close allies of the US that shared its concerns about Iran’s nuclear program, reduced their imports of Iranian oil under the US pressure. India, Iran’s second-biggest buyer, refused to acknowledge the US sanctions as legitimate, but nonetheless reduced purchases enough to placate the US.'

'Even China, Iran’s best customer then and now, bought less Iranian oil, even as it decried the unilateral US sanctions and vowed to defy them.'

Re-creating that scenario could prove challenging after last month's US withdrawal from the deal, known officially as the Joint Comprehensive Plan of Action (JCPOA), also known as Iran Deal.

The US may get “some reductions, but not a whole lot,” said Richard Nephew, a former US State Department official who implemented sanctions during the Obama administration and is now a fellow at Columbia University’s Center for Global Energy Policy. “Then we wind up screaming at our allies, the Europeans, over this and potentially sanctioning them, screaming at the Indians and potentially sanctioning them, while Iran potentially suffers no ill effect.”

The US officials say they are taking the same approach as the Obama administration: asking buyers of Iran’s oil to voluntarily eliminate or at least reduce their purchases, backed by explicit threats to punish any companies that do business with Iran by denying them access to US markets and financial institutions. But ultimately, said US Treasury Secretary Steven Mnuchin, “We will enforce compliance.”

Unlike the last time around, however, the buyers of Iranian oil are uniformly hostile to US goals and likely to delay, resist and outright defy US demands, according to analysts and officials in purchasing countries. Even the US allies in the EU, significant buyers of Iranian oil, hope to keep Iran in the nuclear deal without US participation—something the Iranians say is only possible if oil sales continue unfettered.

In 2012, the EU countries voluntarily imposed a complete boycott on oil from Iran. Other countries—Japan, South Korea, India—also cut back, driven by the combination of the US pressure and a desire to see Iran restrain its nuclear program.

Now things are different, analysts and officials say. Although the US threat of shutting companies out of US markets remains potent, the US administration so far has no active support or open cooperation from any purchaser of Iranian oil. The European governments, which tried to dissuade the US from pulling out of the Iran deal, have announced no plans to cut back on Iranian oil, and privately officials say they hope to avoid doing so.

WSJ wrote Still, the European companies that buy Iranian oil are dependent on US markets and are expected to curtail purchases under the US pressure, though far more slowly than last time. Maersk Tankers AS, one of the world’s largest oil-shipping companies, said last month it would stop taking assignments for Iranian oil shipments and wind down existing customer orders.

But that reluctance among the US allies could hamper Trump’s efforts with Iran’s two biggest customers: China and India. Indeed, some observers wonder whether one or both might actually buy more Iranian oil, especially if it is discounted.

China and India purchased 671,000 bpd 604,000 bpd of Iranian oil in April. During the last round, India refused to recognize the US oil sanctions, but it did eventually cut imports from Iran by about 20%, enough to avoid sanctions from the Obama administration. The government has recently reiterated that it doesn’t recognize unilateral US sanctions on Iran.

Indian government officials say they tell Washington that India needs to maintain good relations with Iran to better help the US. India is backing the development of a major port in Chabahar, south Iran, as part of a commercial corridor aimed at counterbalancing Chinese influence in Pakistan and Afghanistan, in line with a major US objective in the region.

India will seek complete exemptions to US demands to curtail imports from Iran, or at least limit it to the minimum.

“They would make the case that, ‘listen, if we don’t stay engaged with Iran, and particularly with Chabahar, the only other country that you leave the field open to is China, and do you really want that?,’” said Tanvi Madan, an analyst at Brookings Institution, a Washington think tank.

China is an even tougher challenge. Iran’s biggest oil buyer has promised to work with Tehran to avoid disrupting growing investment and trade activity between the two countries. China has also encouraged the use of its currency, Yuan, for international commerce such as oil trading, which traditionally has been conducted almost entirely in dollars.

China may increase its imports of Iranian oil with at least tacit support from Europe. That would help keep the Iran deal in place without US participation by making Iran whole through oil purchases the US gets other parties to cut.

“We have a joint interest in keeping the Iran deal alive,” said Nicola Casarini of the Rome-based think-tank Institute of International Affairs at a recent regional security conference in Shanghai.


Follow us on Twitter @IrnaEnglish