President Barack Obama gave the go-ahead for fresh sanctions against Iran’s oil sector Friday, judging there is enough oil on world markets to ensure the move will not hit U.S. consumers.
With just hours to go before a legal deadline, Obama determined the United States could levy sanctions against banks and other financial institutions buying oil from Iran, without roiling markets.
The step is expected to have major implications for Tehran, essentially forcing companies around the world to choose between trade with the United States and buying Iranian oil.
China, South Korea, India, France, Britain, Spain, Greece and Italy have all been major buyers of Iranian oil in the past.
Oil and gas form the backbone of the Iranian economy and are vital to the survival of the Islamic regime, which has been in power since a 1979 revolution.
Iran’s energy industry accounts for 70 percent of Tehran’s revenues.
The sanctions are part of a broader effort by Western governments to push Iran toward abandoning programs that could be aimed at producing nuclear weapons, to stop support for proscribed groups and to end human rights abuses.
Shortly before Obama’s announcement, Turkey’s national oil company Tupras said it had cut purchases of Iranian oil by 20 percent, according to AFP.
In a presidential statement, Obama said: “There is a sufficient supply of petroleum and petroleum products from countries other than Iran to permit a significant reduction in the volume of petroleum and petroleum products purchased from Iran by or through foreign financial institutions.”
“I will closely monitor this situation to assure that the market can continue to accommodate a reduction in purchases of petroleum and petroleum products from Iran.”
Oil prices in New York rose slightly on the news, increasing around a dollar a barrel for the benchmark futures contract, to reach $104 a barrel.
Obama is required by law to determine by Mar. 30, and every six months after that, whether the price and supply of non-Iranian oil are sufficient to allow consumers to “significantly” cut their purchases from Iran.
The law allows Obama, after June 28, to sanction foreign banks that carry out oil-related transactions with Iran's central bank and effectively cut them off from the U.S. financial system.
“Today, we put on notice all nations that continue to import petroleum or petroleum products from Iran that they have three months to significantly reduce those purchases or risk the imposition of severe sanctions on their financial institutions,” said Senator Robert Menendez, co-author of the sanctions law, according to Reuters.
Obama can offer exemptions to countries that show they have “significantly” cut their purchases from Iran.
Washington recently exempted Japan and 10 EU countries from the sanctions because they have cut Iranian oil purchases.
The president faces a delicate balancing act on Iran, leading up to November elections. On the one hand, he must show voters he is being tough on the Islamic state.
But with oil and gasoline prices surging in response to geopolitical risks, he must also avoid steps that would unduly rattle oil markets, threatening the global economy and hurting voters already angered by the rising cost of fueling their cars.
He is also facing pressure from many in Congress who want to make sanctions even tighter. The House of Representatives has already passed additional sanctions, and a bill is pending in the Senate.
“We welcome the President’s determination and applaud the Administration’s faithful implementation of the Menendez-Kirk amendment,” said a spokesman for Senator Mark Kirk, a Republican who has pushed for additional measures.
“To build on this momentum, we hope the Senate will consider amendments to the pending Iran sanctions bill that would continue to increase the economic pressure on the Iranian regime,” the Kirk spokesman said.