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As sanctions start to bite, Iran crude exports set to wilt

18 July 2018

Last week, Iran's Deputy Ambassador and Charge d'Affaires Massoud Rezvanian Rahaghi, during an address at an event, cautioned New Delhi that it will stand to lose "special privileges" if it cuts import of Iranian oil following USA sanctions.

China, the biggest single importer of Iranian oil at 650,000 bpd according to trade flow data in Thomson Reuters Eikon, may ignore USA sanctions and keep importing.

In 2015, Iran had struck the JCPOA deal with the United States, the UK, Russia, China, France and Germany under which Tehran had agreed to limit its sensitive nuclear activities in return for lifting of crippling economic sanctions.

Iran has said that it would only continue to participate in the 2015 nuclear accord so long as the European Union can somehow guarantee the benefits promised under the deal.

China buying extra Iranian oil could tiresome the economic impact.

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External Affairs Minister Sushma Swaraj will also travel to Tehran for the next Joint Commission meeting in November, an official statement said, which is the month USA sanctions on energy trade would go into effect.

The Wall Street Journal quoted "several European officials" on July 16 as having said that three European states are about to open new accounts or activate old accounts for the Iranian Central Bank in spite of U.S. sanctions in what it described as "the first concrete sign that Europe could deliver on its promise" to sustain the Iranian nuclear deal.

The Trump administration has been going back and forth over how hard it plans on pushing countries to cut their imports of Iranian oil to zero.

The first set of USA sanctions on Iran will start from 6 August and second set will begin from 4 November. India, the world's fastest-growing oil user, could bridge the surplus by up to $4 billion through oil imports alone, government officials said in April.

Still, the next wave of sanctions, set to take effect in November, will be much more important to watch than the upcoming August sanctions.

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"That might include pressure to release oil from the Strategic Petroleum Reserve, which the administration indicated they were considering on Friday", said Lipow. "We've said very specifically, there's no blanket waivers, there's no grandfathering", Mnuchin said, "We want to be very careful in the wind-down around the energy markets to make sure that people have the time". The return of 800,000 bpd from Libya also gives the US a lot more room to tighten the screws on Iran without upsetting the oil market too much.

"The French, British and German governments have told Iran they are exploring activating accounts for the Iranian central bank with their national central banks in a bid to open a financial channel to keep alive the Iranian nuclear deal, according to several European officials", wrote the Wall Street Journal. "It's imperative to counter its habit of violating int'l law".

Iranian President Hassan Rouhani, in remarks carried live on state television on Saturday, said Washington was more isolated than ever over sanctions against Iran, even among its allies.

The likely return of US economic sanctions has triggered a rapid fall of Iran's currency and protests by bazaar traders usually loyal to the Islamist rulers.

The Organization of the Petroleum Exporting Countries (OPEC) agreed with Russian Federation and other oil-producing allies on June 23 to raise output from July, with Saudi Arabia pledging a "measurable" supply boost, but giving no specific numbers.

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As sanctions start to bite, Iran crude exports set to wilt