December 10, 2012 | Quote
US Renews Exemptions From Iran Sanctions
The Obama administration reissued waivers that exempt nine countries, including China, India and Turkey, from fully complying with U.S. sanctions targeting Iran's oil exports, as the U.S. attempts to maintain international pressure on Tehran's finances.
Secretary of State Hillary Clinton said Washington granted the exemptions to these countries for reducing their purchases of Iranian oil over the past six months, thereby helping force Tehran to cut its total oil production by one million barrels a day in September and October from a year earlier.
The other countries granted waivers were Malaysia, South Korea, Singapore, South Africa, Sri Lanka and Taiwan. U.S. and European officials said they believe Tehran is losing around $15 billion every quarter in lost oil sales.
“A total of 20 countries and economies have continued to significantly reduce the volume of their crude oil purchases from Iran,” Mrs. Clinton said. “This has reduced Iran's export volumes and oil revenues, which fund not only the nuclear program but its support for terror and destabilizing actions in the region.”
Experts on Iran and the oil trade worry that the damage being inflicted on Iran's economy might not be sufficient to pressure Supreme Leader Ayatollah Ali Khamenei to give ground on Tehran's nuclear work. The United Nations reported last month that Iran continues to expand its production of nuclear fuel and is moving closer to obtaining weapons-grade materials. Iran says it isn't seeking to develop nuclear weapons.
“While the sanctions are definitely having an impact, they're still not keeping up with Iran's nuclear clock,” said Mark Dubowitz, who studies Iran's oil trade with the Foundation for Defense of Democracies, a conservative think tank. “Iran is still winning,”
The U.S. and European powers are hoping to renew negotiations with Tehran over its nuclear program this month.
The Obama administration has significant leeway in granting countries waivers, and doesn't set specific targets. Many Republicans and Democrats on Capitol Hill, citing the abundant supply of oil on international markets, are arguing that the administration should set more stringent reduction targets.
Sens. Mark Kirk (R., Ill.) and Robert Menendez (D., N.J.) have lobbied the administration to require countries to reduce their purchases of Iranian oil by at least 18%.
The U.S. Energy Information Administration estimates that Iranian crude production has fallen from about 4.2 million barrels a day in late 2011 to about 3.2 million barrels a day now.
That leaves less oil available for export, and reflects the trouble Tehran is having in coaxing more oil out of fields that have suffered years of sanctions, neglect and underinvestment. However, the EIA said in its latest report to Congress that Iran is able to export a little bit more crude now than during the summer because some importing countries have found alternative providers of shipping insurance.
“Iran's difficulties in exporting its oil seemed to have eased somewhat in September and October,” the EIA said in its October report.
A focus of the State Department's diplomacy has been to gain Beijing's cooperation in reducing its Iranian oil purchases. China has been the largest buyer in recent years.
Chinese government data from October showed a 23% decline from the previous year in imports from Iran, to about 450,000 barrels a day. That is significant because the big drop in Chinese imports of Iranian crude in the first half of the year was due to a pricing dispute between Beijing and Tehran, not because China was supportive of U.S. sanctions.
Energy analysts say the year-to-year decline in Chinese imports of Iranian crude is partly due to a slowdown in the energy-intensive Chinese economy.
Some U.S. lawmakers were angered that Turkey was granted a waiver despite Ankara's admission that it has helped Iran conduct energy exports through the acquisition of billions of dollars of gold. President Barack Obama issued a presidential decree in July banning foreign parties from helping Tehran acquire U.S. dollars or precious metals.
“The administration must immediately implement these new sanctions rather than providing another pass for those who enable Iran by continuing their commercial activities with the regime,” said Ileana Ros-Lehtinen (R., Fla.), chairman of the House Foreign Affairs Committee.
The State Department reported recently to Congress that Turkey made “significant” reductions in Iranian oil imports, thus earning its exemption.
The Obama administration is set to increase its financial pressure on Tehran in the coming months, according to U.S. officials.
In February, countries gaining exemptions must comply with new payment restrictions. In particular, the U.S. will require that these countries make payments into accounts at banks within their own borders. The funds can then be used only to purchase authorized goods or services.
“The funds can't be transferred to a third country; can't be repatriated to Iran; and can't be used to facilitate third-country trade,” said the Treasury Department's point man on Iran sanctions, Undersecretary David Cohen, in a speech Thursday in Washington.