Following the IRGC Blacklisting
Time to Zero Iran’s Oil Exports
In an unprecedented step, U.S. President Donald Trump formally designated Iran’s Revolutionary Guards (IRGC) as a “Foreign Terrorist Organization” (FTO). This move carries impeccable financial consequences for Tehran and long prison terms for those who provide material support to the IRGC or its extensive list of affiliates. More is necessary, howeer, to significantly deprive the mullahs of the cash flow used to fuel their malign policies.
While some may argue this move comes with risk and the regime in Iran may retaliate, it is worth noting that Tehran also threatened massive retaliation after Trump’s withdrawal from the highly flawed 2015 nuclear deal. Nearly a year later, the mullahs now face an economy on the verge of collapsing in the face of U.S.-led sanctions, and growing public dissent.
There should be no doubt on the IRGC’s importance to Tehran: the regime’s highly controversial ballistic missile and nuclear programs are mainly under IRGC control.
The IRGC Quds Force, under the notorious Qasem Soleimani, exports terrorism (through money, arms and conscripts) and is directly involved in blueprinting and conducting terror plots across the globe, especially Europe in 2018.
Blacklisting and sanctioning the IRGC is critical to addressing key elements deliberately overlooked in the nuclear deal blessed by former U.S. President Barack Obama. This includes the mullahs’ missile program and its fueling of terrorism across the globe.
This is another step in the right direction of imposing “maximum pressure” on the regime ruling Iran. To complete this initiative, the mullahs in Iran should be completely deprived of the ability to finance their bellicosity.
Iran’s economy relies 70 percent on crude oil exports. 40 years down the road of their reign, it is common knowledge that these petrodollars are used by Tehran’s rulers to run their domestic crackdown apparatus, fund/fuel their Islamic fundamentalism and extremism across the globe, and develop and advance a ballistic missile arsenal, to name a few of their destructive activities.
It has been a few months that oil market experts are weighing the impacts of OPEC’s production decreases, escalating U.S. shale output, trade disputes between Washington and Beijing, oil demand witnessing a decline and recent oil sanctions imposed by the U.S. on Venezuela.
Making all the analysis even more peculiar is the upcoming deadline of the U.S. oil sanctions waivers provided for eight countries, allowing them to continue importing oil from Iran at a limited amount.
Signals from the Trump administration continue to emphasize a final objective of zeroing Tehran’s oil exports. Some experts also believe oil and gas prices at the end of April will also play a role in Trump’s decision.
Meanwhile, Iran’s buyers in Asia reportedly lowered imports in March due to the obscure future fate of the generous – and somewhat unexpected – wavers issued by Washington back in November. This confusion is resulting in governments forming contingency plans, seeking alternative supplies of oil and preparing for a complete ban of Iranian oil.
South Korea has reportedly begun testing super-light U.S. oil sold by energy firm Anadarko Petroleum Corp as a substitute for crude previously imported from Iran.
China and India, among the eight major clients of Iranian oil, received such waivers after the U.S. imposed sanctions on the mullahs’ oil. Back in November, this rendered a sharp decline in oil prices for the end of 2018, following a significant production increase by the OPEC+ alliance aimed at offsetting what Washington had initially pledged of a full zeroing of Iran’s oil exports.
“Indian refiners are holding back from ordering Iranian oil for loading in May pending clarity on whether Washington will extend a waiver from U.S. sanctions against the OPEC-member,” Reuters reported citing four sources.
Bharat Petroleum Corporation Limited (BPCL), a Government of India controlled Maharatna oil and gas company headquartered in Mumbai, ordered 1 million barrels of oil from Iran for the month of April.
As we enter the second quarter of 2019, expectations show U.S. policy in regards of Iran’s oil exports playing a key factor for near future oil prices.
Ironically, the price of oil is also likely to play an important role in Washington’s highly anticipated decision come this May 2. If prices remain at current levels, there is a possibility of the U.S. extending waivers while demanding waiver earners impose a decrease of up to 50 percent in their Iranian oil imports.
There is a genuine belief that Tehran will not be able to tolerate its crude oil exports decreasing below the 800,000 barrel per day threshold. These numbers are not taking into consideration Iran’s condensate oil exports. Tanker-tracking data from a variety of sources showed a 1 to 1.2 million bpd export in January and February.
Senior U.S. officials, concerned over the malign activities of Iran’s regimes, are also monitoring the effectives of their sanctions.
In a CNBC interview, when asked if it was possible to bring down Iran’s oil exports to zero, Secretary Pompeo responded by saying, “I’m not going to get ahead of myself or ahead of the President, but make no mistake about it, that’s the direction of travel.”
Brian Hook, the State Department Special Representative for Iran, recently hinted to the media about projections for supply being above demand and how this could provide further leverage for Washington’s upcoming decision.
Special Rep. Brian Hook: 3 of the 8 importers of #Iran’s oil that were granted Significant Reduction Exceptions in Nov. 2018 are now at zero. That brings us to a total of 23 importers that were once purchasers of Iranian oil that are now at zero. pic.twitter.com/DUB6VpUuM7— Department of State (@StateDept) April 2, 2019
Excluding exports of Iran and Venezuela, OPEC currently enjoys an effective spare production capacity of nearly 3 million bpd due to continuing cuts. This renders “the potential means of avoiding serious disruption to the oil market is theoretically at hand,” in the event of serious losses from Venezuela, according to a recent statement from the International Energy Agency.
Tehran’s mullahs are placing their eggs in a basket that relies on a scenario of significant loss in oil output due to unstable conditions in Venezuela. Such an outcome, alongside a possible no-waiver policy, could scare the oil market and push prices upwards.
Japan, another recipient of oil sanctions waivers, is also paying close attention. NHK, a Japanese broadcaster, cited Hook back in February saying Washington has no plan to extend the waivers.
Declining Iran’s oil exports down to zero is possible and only needs a strong and united will within the U.S. administration. As reported by Adam Kredo of The Washington Free Beacon, there have been signs of resistance among the U.S. State and Treasury departments against the “maximum pressure” policy demanded by President Trump.
Following the IRGC terrorist designation, the next step forward for Washington should be to end all Iran oil sanctions waivers. This will:
- Corner Tehran’s mullahs to make meaningful decisions about behavior changes demanded by the U.S. and prevent them from buying further time.
- End the flow of petrodollars used by Tehran for a conglomerate of malicious activities.
- Significantly deprive funding and weaken the regime’s domestic crackdown apparatus. As a result, such a policy will directly support the Iranian people and their anti-regime protests.