U.S. to end sanctions waivers for major Iranian oil importers

U.S. to end sanctions waivers for major Iranian oil importers

The Trump administration on Monday targeted Iran's energy sector by announcing the USA would no longer exempt any countries from sanctions for importing Iranian oil.

The US' move which is seen as an escalation of President Trump administration's "maximum pressure" on Iran comes after it previous year gave temporary 180-days waiver to eight countries, including India, China, Turkey and Japan among others.

Another drop in Iranian exports would further squeeze supply in a market already tightened through the US sanctions against Iran and fellow OPEC member Venezuela, plus voluntary cuts led by the Organization of the Petroleum Exporting Countries.

If the Trump administration does confirm the end of waivers, this would have wide reverberations in two main directions: the US-China trade talks and the OPEC+ production cuts.

Benchmark Brent crude oil futures rose by as much as 3.2 percent to $74.31 a barrel, the highest since November 1, in early trading on Monday in reaction to expectations of tightening supply.

West Texas Intermediate for May delivery, which will expire Monday, rose as much as $1.87 to $65.87 a barrel on the New York Mercantile Exchange, while the more-active June contract gained 3 percent to $65.99. It earlier touched a high of $65.87, a level not seen since late October.

President Donald Trump reinstated the sanctions a year ago after abandoning a landmark nuclear deal with Iran.

"Only tough steps of this kind will force the ayatollah regime in Iran to completely stop the development of its unsafe nuclear program and its support for Hezbollah and the other terror groups in the region".

Along with sanctions, Washington granted waivers to eight economies that had reduced their purchases of Iranian oil, allowing them to continue buying it without incurring sanctions for six more months.

Having settled the Good Friday week nearly unchanged near the 64 handle, WTI (oil futures on NYMEX) kicked-off the week on a bullish note, clinching fresh five-month tops of 65.80 after the Washington Post (WaPo) reported on Sunday that the USA is planning to end the waivers given to the current buyers of Iranian oil on the sanctions.

Since November, three of the eight - Italy, Greece and Taiwan - have stopped importing oil from Iran.

As a result of this decision, all countries including India would have to bring down its import of oil from Iran by May 2.

"The Trump Administration and our allies are determined to sustain and expand the maximum economic pressure campaign against Iran to end the regime's destabilizing activity threatening the United States, our partners and allies, and security in the Middle East", the White House released in a statement.

The move was immediately praised by Israel, with Prime Minister Benjamin Netanyahu calling it a "very important" decision "to increase pressure on the Iranian terrorist regime". This apparently will only directly impact five countries that had been receiving waivers since the Trump administration reimposed sanctions on Iran's oil output.

China criticised the reports, with Geng Shuang, a foreign ministry spokesman, saying that Chinese dealings with Iran were "reasonable and legitimate, which thus deserves respect".

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