By restoring sanctions against Iran, US President Donald Trump has tasked a little-known State Department office with convincing companies and governments worldwide to cut imports of Iranian crude – even if that means paying more to buy oil from other suppliers.
The Bureau of Energy Resources got the job done during the Iran sanctions that spanned 2012 to 2015, when President Barack Obama had the co-operation of European leaders in choking off Iran’s main revenue source to pressure it to curb its nuclear programme.
Now the office faces steeper challenges: Europe opposes Trump’s aggressive stance on Iran and is considering ways to block sanctions; the US Senate has yet to confirm a leader for the bureau; and the State Department has its hands full managing sanctions on Venezuela, trade disputes with China, and talks with North Korea.
“It’s going to be a lot harder this time,” said Amos Hochstein, who led the bureau under President Obama, when diplomats from the United States, Iran, China, France, Russia, the UK and Germany formed the 2015 nuclear deal. “There’s going to be a lot less goodwill.”
Under Trump’s renewed sanctions, foreign firms will have 180 days to make reductions or face penalties that can include fines and restrictions on doing business in the United States.
Washington can identify the buyers, sellers, traders, shippers, insurers and financial institutions involved in Iranian oil purchases because all foreign transactions in US dollars are cleared by the Federal Reserve. The work is harder if trades are in other currencies.
The US has banned Iranian oil imports to its own shores for decades, so Washington’s ability to squeeze the exports will rely on convincing foreign governments and firms to pressure Iran back to the negotiating table for a “better deal” – as Trump has said he expects. Officials at the Department of Treasury, the Department of Commerce and the White House did not respond to a request for comment on the difficulty in managing oil curbs on Iran. When asked about the challenges, energy bureau spokesman Vincent Campos said the office “will carry out sanctions policy in the current environment”.
If successful, sanctions would slash exports from one of the top suppliers in the Organization of the Petroleum Exporting Countries (OPEC) and likely raise prices for crude globally by forcing buyers to compete for alternative supplies. US oil prices have already vaulted over $70 a barrel to highs not seen since 2014. Under Obama and Hochstein, Iran’s exports of oil plummeted from about 2.5m barrels per day (bpd) to less than 1.3m bpd, according to the US Energy Information Administration.
Imposing those cuts was difficult, even with more geopolitical backing. Teams from the bureau joined with colleagues from the Departments of Treasury and Commerce to visit governments in Asia and the Middle East, cajoling them into finding alternatives to Iranian oil, and to help battle smuggling. The European Union joined the United States and passed its own Iran sanctions in 2012, cutting its imports of Iranian oil from 650,000 bpd to zero.
This time, European leaders will be less helpful. They have urged Trump not to leave the nuclear deal, which they say was hard-won and has proven to be effective in preventing Iran from obtaining a nuclear weapon. The EU, meanwhile, is considering a “blocking statute” that would ban any EU company from complying with US sanctions. (Reuters)