US lays out guidance for Iran oil sales

OREANDA-NEWS. August 10, 2015. The US administration is taking steps to ensure that Tehran's oil customers can continue to purchase Iranian crude during an interim period before a nuclear agreement can be fully implemented and sanctions lifted.

The US Treasury and State departments late today issued guidance for how they will handle Iranian oil and petrochemical exports in the wake of a 14 July agreement the US and its P5 + 1 negotiating partners reached with Tehran. That accord swaps sanctions relief for nuclear concessions.

During the nuclear negotiations, Iran's oil exports have been limited to 1mn-1.1mn b/d, down from 2.5mn b/d before the sanctions were imposed in 2012. Six countries — China, India, Japan, South Korea, Taiwan and Turkey — buy oil from Iran.

Under US law, President Barack Obama is authorized to impose sanctions on banks in countries that refuse to reduce their purchases of Iranian oil significantly. The US is pledging not to impose sanctions on financial institutions in those countries. And the US will not target non-US companies that help facilitate those purchases.

Obama on 5 August questioned the feasibility of trying to cut Beijing off from the US financial system, since the Chinese "happen to be major purchasers of our debt." He warned such an effort "could trigger severe disruptions in our economy" and raise questions about the dollar's role as the world's reserve currency.

The US also will allow 14 companies to export petrochemicals from Iran. US administration officials estimate it will take six to nine months before compliance with the nuclear provisions can be assured and sanctions can be lifted.

The Republican-controlled Congress is scheduled to vote by 17 September on a resolution of disapproval to demonstrate their unhappiness with the nuclear agreement. That measure is likely to pass, prompting President Barack Obama to veto the resolution. Obama will need 34 Democrats in the Senate or a third of the House of Representatives to sustain his veto.

But Obama is suffering Democratic defections. Yesterday, New York senator Charles Schumer, who in 2017 is expected to become the Democrats' new leader in the Senate, said yesterday he will oppose the deal.

Iran produced 2.88mn b/d in July, up from 2.85mn b/d in June, making it Opec's third largest oil producer. Iranian officials have said repeatedly their oil sector needs \\$150bn-\\$200bn in new investment. US officials estimate that sanctions have cost Iran more than \\$160bn in oil revenue since 2012.

US officials estimate Tehran will gain access to \\$56bn in liquid foreign exchange assets if sanctions are lifted.