Iran ignores US sanction waivers while experts warn of backfire

After the US announced it will not set sanction exemptions to Iran's oil customers, Iran responded by calling the sanctions illegal and emphasizing they are not to be taken seriously.

By Sohaila Barghash

Iranian foreign ministry said in a statement that “Since the sanctions in question are principally illegal, the Islamic Republic of Iran did not and does not attach any value or credibility to the waivers given to the sanctions.”

On Monday, the US has reached out to five countries, Japan, South Korea, Turkey, China and India, in effort to prevent them from importing oil from Iran.

The US has given the five countries a period until 2nd May, stating that they will no longer exempt them from US sanctions.

The Trump Administration has launched its “Maximum Pressure” campaign against Iran, aiming to isolate the country.

Tehran announced it is prepared for the end of waivers, as the Revolutionary Guards threatened to close the Strait of Hormuz, a major oil shipment channel in the Gulf.

Additionally, US State Department, Defense and intelligence officials as well as other experts, warned that the move could backfire, leading to ripple effects in countries like China, Turkey and Iraq.

The Iranian foreign ministry confirmed Iran was in “constant talks with its international partners including the Europeans” on the ending of the exemptions.

After US President Donal Trump pulled the US out of the 2015 nuclear deal, his administration granted eight oil sanctions waivers after reimposing sanctions on Iran.

The waivers were granted in order to both give those countries enough time to find alternative energy sources, and to prevent a shock to global oil markets from the sudden removal of Iranian crude.

In response to the sanctions, Greece, Italy and Taiwan stopped buying Iranian oil, however the five countries at which the US warning was issued, have continued to import Iranian oil.

In a press briefing, Secretary of State Mike Pompeo stated the decision was “dramatically escalating our pressure campaign in a calibrated way that meets our national security objectives while maintaining well-supplied global oil markets”.

He also highlighted the US position and warned his country will punish those who buy Iranian oil after May 2, saying, “We've made clear - if you don't abide by this, there will be sanctions. We intend to enforce the sanctions.”

Israeli Prime Minister Benjamin Netanyahu supported the move, while Saudi Arabian Energy Minister Khalid al-Falih ensured his country and others would make certain that “the global oil market does not go out of balance.”

On the other hand, Turkey slammed the decision, saying it will “harm the Iranian people” and will not “serve regional peace and stability”.

Chinese foreign ministry spokesman, also announced his country’s opposition to the unilateral US sanctions against Iran adding that China's bilateral cooperation with Iran was in line with the law.

The Trump administration said it is cooperating with top oil exporters including Saudi Arabia and the UAE in order to ensure the oil market was “adequately supplied”, however, the market is facing a lack in supplies.

Joe McMonigle of Hedgeye Risk Management said in a note to clients, “Combined with declines in global crude stocks, continued losses in Venezuela production as well as a possible disruption in Libya, a zero-waivers Iran decision will present a challenge to keeping global oil prices in check.”

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