US announces end to sanctions waivers for Iranian oil purchases
On April 22, 2019, almost a year after President Trump announced the US’s withdrawal from the Iran nuclear deal (the Joint Comprehensive Plan of Action), the Trump administration announced that it will remove waivers that have allowed certain countries to continue oil purchases from Iran without facing US sanctions. When the withdrawal took effect in November of 2018, the Trump administration granted significant reduction exceptions (i.e., waivers) to eight countries—China, Greece, India, Italy, Japan, South Korea, Taiwan, and Turkey—which allowed them to continue purchasing oil from Iran for 180 days. These waivers are set to expire on May 2, 2019 and the Trump administration has made it clear that it will not renew those waivers. According to press reports, this decision is intended to bring Iran’s oil exports to zero by cutting off its principal source of revenue.
The practical impact of this decision is that, as of May 2, 2019, companies in those eight countries will have to entirely end their imports of Iranian oil or potentially face US sanctions. Some of those countries reportedly have already halted their Iranian oil imports and no longer need waivers. However, the decision could have significant implications for Iran’s major trading partners that have continued to import Iranian oil—China, India, Japan, South Korea, and Turkey. Turkish officials have denounced the decision, citing the critical role of Iranian oil in meeting Turkey’s energy needs and the practical difficulties that Turkey will face as a neighbor of Iran in completely closing its economy to Iranian goods. In a message posted on Twitter, Turkey’s Foreign Minister Mevlüt Çavuşoğlu said: “Turkey rejects unilateral sanctions and impositions on how to conduct relations with neighbors.” Some questions regarding implementation remain unanswered. For example, it is not clear how the US government will respond to companies that have existing orders for Iranian oil that are expected to be delivered after the waivers expire.
We will continue to monitor these developments and issue additional updates as warranted.