London, 10 July – The US is looking to halt all of Iran’s crude oil exports from November and in relying on Saudi Arabia and other oil-producing countries to fill the gap.
They are hoping that by cutting off Iran’s oil exports, they can further destabilise the Iranian economy enough to bring it back to the table for a new nuclear deal or enough that the people can make a major change.
On July 2, Brian Hook, the director of policy planning, said: “Our goal is to increase pressure on Iran by reducing to zero its revenue from crude oil sales.”
He continued: “We are working to minimize disruptions to the global market, but we are confident that there is sufficient global spare oil production capacity. We are not looking to grant licenses or waivers broadly on the re-imposition of sanctions, because we believe pressure is critical to achieve our national security objectives.”
If the US does manage to cut off Iran, the rest of the oil-producing countries would need to make up the two million barrels per day (bpd) that Iran currently produces to avoid squeezing the market.
However, it is estimated by the International Energy Agency that oil producing countries have 3.7 million bpd of spare capacity, with Saudi Arabia having just over two million bpd in spare capacity.
The IEA believes that Saudi Arabia could raise its production to just over 12 million bpd and sustain that for an extended period, which would cover the loss from Iran, but this would be more than the Kingdom has ever produced before.
Some believe that this would put pressure on Saudi oil wells and could cause long-term damage, but this could be reduced by sharing it out among all oil-producing countries.
Why is the US determined to cut off Iranian oil?
This is part of the US’s returning sanction on Iran, following Donald Trump’s withdrawal from the Iran nuclear deal in May. Some sanctions come into place in August, but sanctions on Iranian oil will return in November.
These sanctions will mean that any country who continues to buy Iranian oil (including US allies) will come under strict sanctions, which could cut them off from the US financial markets.
The US wants to put Iran in a weak position whereby the mullahs must return to the negotiating table and agree to a fairer nuclear deal than the one they had. However, it should be noted that the only way to ensure that Iran is not a nuclear power is to allow the people of Iran and their organised resistance to take power.