US reassures Iran on oil sanctions relief

OREANDA-NEWS. December 24, 2015. US secretary of state John Kerry has told his Iranian counterpart that the US will honor the agreement enabling Iran's return to global oil markets despite efforts in the US Congress to derail the deal.

The \\$1.8 trillion spending and tax bill, which the Congress passed and US President Barack Obama signed on 18 December, includes a provision imposing more stringent US travel requirements on recent visitors to Iran from the EU, Japan and other countries that at present have the right to travel to the US without a visa.

The provision may create bureaucratic hassles for the Tehran-bound oil and natural gas company executives who have legitimate business interests in the US. And Iranian officials view the bill as a violation of the July agreement with the P5+1 group of global powers, under which the US and the EU promised not to take measures restricting full implementation of sanctions relief.

The change in the visa regime will not prevent the US from meeting its commitments under the nuclear deal with Iran and the US State Department will implement the visa legislation in a way that will not interfere with legitimate business interests of Iran, Kerry told Iranian foreign minister Mohammad Javad Zarif in a letter on 19 December.

Advocacy group the National Iranian American Council made the letter public and the State Department confirmed its content yesterday.

The legislation does not allow the administration to grant a blanket waiver to travelers to Iran in order to facilitate the implementation of the nuclear deal, US House of Representatives Republican majority leader Kevin McCarthy said yesterday.

The congressional opponents of the Iran nuclear agreement separately are raising concerns about recent tests of Iranian ballistic missiles, which they say point to evidence of Iran's interest in maintaining a nuclear weapons program.

The Obama administration has condemned an Iranian ballistic missile launch in October and is investigating reports of another launch in November. But the State Department said the missile launch does not violate the nuclear agreement.

The US and UN nuclear watchdog the IAEA have said that Iran progressing fast in implementing its commitments under the July nuclear deal. The completion of Iran's initial compliance measures and their subsequent verification by the IAEA will result in the lifting of US and EU sanctions on Iran's oil industry.

Iranian officials insist that they can show compliance with the July deal in January, ahead of the 26 February parliamentary election. Russia expects full implementation of the agreement in the first quarter. But the US and the EU have not publicly stated a specific date for when sanctions could end.

Iran after the Kerry letter dialed down its criticism of the US visa bill. And Iranian deputy foreign minister Abbas Araqchi acknowledged yesterday that the nuclear deal is facing as much opposition in Iran as it does in the US.

Iran has much to gain from the agreement and has interest in continuing to meet its obligations. The projected increase in oil sales will help boost Iran's GDP by 4pc-5.5pc in the 2016-17 Iranian fiscal year that starts on 21 March, the IMF said yesterday.

The IMF projects Iran's crude oil exports could rise to 1.81mn b/d in March 2016-March 2017 and to 2.13mn b/d in 2017-18, from an estimated 1.24mn b/d in the year ending March 2016. The US State Department estimates Iranian crude exports at 1mn b/d at present, down from 2.5mn b/d in 2011.

Iran's return to global oil markets could pressure oil prices by \\$5-\\$15/bl, which will boost global GDP by an estimated 0.3 percentage points, according to the IMF report completed on 18 November and released yesterday.

The IMF staff had completed its Iran report before global crude oil prices fell in the wake of OPEC's inconclusive meeting in Vienna earlier this month. The Ice prompt-month Brent futures contract yesterday settled at \\$36.35/bl, an 11-year low, down from \\$44.66/bl on 20 November.

Lifting US and EU oil sanctions against Iran will scarcely affect global oil prices or oil market fundamentals in the longer term, according to World Bank consultant on oil Mamdouh Salameh.