As feared, the United States announced it will not extend temporary waivers given to countries that purchase Iranian oil. Now, no country can buy petroleum products from Iran without risking the imposition of sanctions against it. Eight countries were given waivers, Japan among them. Anticipating the revocation, Japanese refiners halted purchases from Iran earlier this year; finding other suppliers has not been difficult and Japanese energy prices remain stable.
The wisdom of the U.S. strategy is questionable. Washington has withdrawn from a multilateral agreement on Iran’s nuclear program that Tehran was honoring. The U.S. administration’s ultimate objective is unclear and may not even be legal. Its means are generating more friction with allies than changes in Tehran’s behavior.
U.S. President Donald Trump called the Joint Comprehensive Plan of Action (JPCOA), the multilateral agreement signed by his predecessor, Barack Obama, to cap Iran’s nuclear program, “a horrible one-sided deal that should never, ever have been made.” He vowed to withdraw from it — which he did — and impose “the highest level of economic sanctions” on Iran. To ensure that those measures hurt Tehran, he threatened secondary sanctions against countries that did business with Iran.
In November, sanctions were imposed on the petroleum sector (along with the shipbuilding, shipping and banking sectors,) the lifeblood of the country’s economy. Washington gave six-month waivers, however, to Iran’s biggest oil purchasers — Japan, China, India, South Korea, Taiwan, Italy, Greece and Turkey — to give them time to find alternative sources of supply. Most complied.
Japan, which had purchased 5 percent of its oil imports from Iran, stopped loading oil in September in anticipation of sanctions, and then resumed in January after the waiver was granted. Fearing, rightly, that it would not be extended, refiners again halted imports in March after purchasing 15.3 million barrels of oil in the first three months of the year. While that appears substantial, it is in fact a 33 percent drop in shipments from the previous year, before sanctions were applied.
The sanctions have hurt. Iranian exports are estimated to have dropped below 1 million barrels per day; they were more than 2.5 million barrels per day before Trump withdrew from the JPCOA. As a result, the World Bank forecasts that Iran’s GDP will shrink 3.8 percent this year, while the IMF predicts a 6 percent contraction. Both organizations blame U.S. sanctions for the dire outlook.
Iranian officials condemn the U.S. moves as illegal, and some governments agree. China, one of Iran’s biggest customers and another country granted a waiver by Washington, said the U.S. had no jurisdiction to interfere with its trade. As in all such circumstances, Beijing opposes U.S. unilateralism and a foreign ministry spokesperson insisted that “China-Iran cooperation is open, transparent and in accordance with law. It should be respected.” Turkey agreed. Foreign Minister Mevlut Cavusoglu tweeted that U.S. sanctions would “not serve regional peace and stability, yet will harm Iranian people,” adding that “Turkey rejects unilateral sanctions and impositions on how to conduct relations with neighbors.”
Washington is undeterred. Secretary of State Mike Pompeo said the Trump administration remains “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.” It is working with regional partners, such as Saudi Arabia, to ensure that its allies and partners retain reliable supplies of energy. Saudi Arabia said it would coordinate with other oil producers to ensure that “the global oil market does not go out of balance.”
In Tokyo, Chief Cabinet Secretary Yoshihide Suga said there would be “no negative effect on the operations of Japanese companies,” and Minister of Economy, Trade and Industry Hiroshige Seko promised consultations with the U.S. as needed. Unfortunately, it is unlikely that the U.S. will talk to Japan about the purpose of this entire exercise. The Trump administration believes that the Iranian government is the source of almost all trouble in the Middle East and that it can force Tehran to change its behavior in virtually every dimension of its foreign policy. It ignores the fact that the Obama administration tried to do that and settled for a partial nuclear deal because that is the best that could be accomplished — and could be supported by other negotiating partners.
Worse, the U.S. seems oblivious to the damage that it is doing to its reputation by withdrawing from an agreement that all other parties are honoring and by taking unilateral measures that encourage other nations to take countervailing steps — setting up payment systems that are beyond the reach of U.S. sanctions — that threaten to undercut U.S. influence and power. It is a shortsighted policy, even if Japan and other governments escape the worst effects of the sanctions.
IN FIVE EASY PIECES WITH TAKE 5