Iran sanctions relief vexes US policymakers

OREANDA-NEWS. November 05, 2015. Lifting sanctions on Iran's oil industry presents a challenge for the US administration more accustomed to influencing foreign countries by the threat or application of sanctions, a State Department official said today.

"We are in an episode where we need to learn how to influence countries by pulling back sanctions, rather than by applying sanctions," said Daniel Ahn, senior advisor to the State Department chief economist.

The State Department and the Treasury Department's Office of Foreign Assets Control are learning how to unwind the sanctions, Ahn said during a discussion today at Washington, DC-based think tank Center for Strategic and International Studies.

The US on 18 October said it will waive sanctions targeting foreign oil companies doing business with Iran and banks domiciled in countries purchasing Iran oil, as part of a deal that resulted in concessions from Iran on its nuclear program. But the US sanctions will not be lifted until after mid-December, at the earliest.

Iran, which produced 2.86mn b/d in September, says it can increase production by 500,000 b/d when sanctions end and by another 500,000 a year after that.

The growth of US oil supply from technologies used to tap shale oil has strengthened the US ability to use sanctions against major oil producers, Ahn said. "The shale revolution has improved the resiliency of the US and the entire world to crude price shocks."

But the US is not targeting Russian crude production despite having imposed sanctions on Russian energy firms over the crisis in Ukraine. "We have been very careful to craft sanctions in a way so as not to disrupt the markets and supply for our allies," Ahn said.

Russia's crude and condensate production in September was 10.7mn b/d.