The US policy to stop Iran from making money through oil exports in already in full swing, despite the fact that sanctions targeting the energy industry in Iran don’t come into effect until November.

In August, Iran’s oil exports have dropped considerably, with big buyers like China and India cutting their purchases ahead of the incoming sanctions. In mid-August, Iran’s crude sales dropped to 1.68 million barrels per day (bpd), which is 20% lower than in July (before the first round of sanctions took effect) and 62% lower than in May (when Trump pulled out of the nuclear deal and promised sanctions).

The nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), gave sanctions relief to Iran in exchange for restrictions on their nuclear programme. Trump certified Iran as noncompliant with the deal in October 2017 and pulled out altogether in May.

The first round of sanctions, targeting Iran’s purchase of US dollars, Iran’s trade in gold and other precious metals, and the sale of mechanical parts and services to Iran, came into effect on August 6. The second round of sanctions, targeting Iran’s petroleum sector (an estimated $36 billion), come into force in November.

In order to enforce these sanctions, the US will use economic and diplomatic pressure on the countries that currently buy oil from Iran, with the aim of cutting Iran’s exports by 1 million bpd. Secretary of State Mike Pompeo said that the US wanted to get Iran’s oil exports as low as possible, while National Security Advisor John Bolton said they wanted to get it down to zero.

In July, many of Iran’s buyers increased their purchases in an attempt to get as much oil as possible delivered before the US sanctions went into effect and to cash in on Iran’s desperate attempt to keep buyers interested by selling its oil at a major discount. However, this dropped significantly in August. South Korea even stopped buying Iranian oil altogether.

In response to the incoming sanctions, Iran has threatened to close the Strait of Hormuz shipping channel, where 20% of the world’s oil passes through, but the US has vowed to keep the waterway open, so any attempts to close it would be considered an act of war on the US and their allies.

Ariel Cohen, a Senior Fellow at the Atlantic Council and the Founding Principal of International Market Analysis, said: “Would the Ayatollahs really risk their self-preservation over a few million barrels of oil? Probably not. Then again, no one thought the Empire of Japan would either.”

Source » ncr-iran