The Trump administration will grant eight jurisdictions special exceptions to continue importing oil from Iran after U.S. sanctions on the country snap back into place on Monday, according to cabinet members.
President Donald Trump gave oil buyers 180 days to wind down purchases of Iranian crude when he pulled out of the Iran nuclear deal in May. The eight waivers will allow the jurisdictions to more gradually reduce their purchases after the Nov. 4 deadline.
Oil market watchers have been closely monitoring the situation to determine how forcefully the Trump administration will enforce the sanctions. State Department officials initially said importers must cut their purchases to zero by November, but administration officials subsequently telegraphed that some exceptions would be made.
Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin on Friday declined to name the eight jurisdictions during a conference call with reporters. The officials said all of the countries or territories have significantly reduced their purchases and will be given more time to further reduce their imports.
Two of the countries have almost entirely stopped buying Iranian oil, and could be to zero within a few weeks, Pompeo said.
Japan, India and South Korea are among the countries, and China is still negotiating a waiver, Bloomberg News reported earlier on Friday, citing a senior administration official. Pompeo confirmed on Friday that the European Union is not one of the jurisdictions that will receive a waiver.
The revenue from Iranian oil purchased through waivers will sit in foreign accounts and can only be used by Iran to purchase humanitarian goods and non-sanctioned items, Pompeo said.
The sanctions on Iran's energy sector, shipping, ship-building and financial industries will officially go back into effect after 11:59 p.m. ET on Sunday.
Shortly after the secretaries' conference call with reporters, President Donald Trump tweeted a photo of himself captioned "Sanctions are coming," a play on the "Game of Thrones" theme "Winter is coming."
Pompeo said the threat of sanctions will have cut Iranian oil exports by more than 1 million barrels per day by the time they are officially restored on Monday. That is larger than many analysts initially expected.
"We exceeded our expectations for one simple reason: Maximum pressure means maximum pressure," he told reporters.
The sanctions were first implemented by the Obama administration to exert pressure on Iran's leadership to negotiate limits on its nuclear program. The United States — along with Britain, China, France, Germany and Russia — clinched a deal with Iran in 2015 that paved the way for sanctions relief the following year.
The Trump administration says the deal was flawed and is refusing to abide by it. It is restoring the sanctions in an effort to convince Iran to concede to a list of 12 demands.
Pompeo claimed the administration's Iran policy has had little impact on oil prices, despite a wealth of oil market analysis identifying the sanctions as a major driver for rising crude prices this year.
"Our laser-focused approach is succeeding in keeping prices stable with a benchmark Brent price right about where it was in May of 2018 when we withdrew from the JCPOA," he said, referring to an acronym for the Iran nuclear deal's official name.
It's true that the Brent crude price today is comparable to the cost on May 8, but Pompeo's analysis glosses over significant volatility in the interim, and ignores that oil prices rose in anticipation of the U.S. withdrawal from the nuclear deal.
In the month prior to Trump's announcement, the cost of crude ran up about $7 a barrel, hitting 3½-year highs. Oil prices traded in a range until September, when they began a rally to four-year highs as traders braced for potential oil shortages following the sanctions.
Prices have since backed down to their lowest since April following a punishing October sell-off in global financial markets, weakening oil demand forecasts and increases in output from OPEC, the United States and Russia.
International benchmark Brent crude is up nearly 9 percent this year, while U.S. crude has risen more than 4 percent. Higher crude costs have heaped financial pain on oil importing countries with weakening currencies, including India, Argentina and Turkey.
Mnuchin said the list of blocked entities will total roughly 700 when the final sanctions information is released on Monday. That includes hundreds that were granted sanctions relief under the 2015 nuclear deal, as well as roughly 300 additional entities.
The Treasury secretary also sought to clarify the U.S. position on SWIFT, the financial messaging system that facilitates transactions around the world.
Mnuchin said SWIFT could be subject to sanctions if the system facilitates transactions for designated Iranian financial institutions. The United States is telling SWIFT to disconnect any of those designated institutions as soon as possible, he added.
The SWIFT system will be allowed to facilitate transactions with non-designated entities for certain humanitarian goods like medicine and food, Mnuchin said. However, he warned that the United States would sanction banks that facilitate illicit transactions masquerading as humanitarian trade.