The Trump administration is temporarily granting eight countries permission to purchase oil from Iran.  The Iran sanctions exemptions for China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey are set to last up to 180 days.  Getty Images photo.

Over 20 countries observe Iran sanctions

The Trump administration softened its stance on Iran sanctions on Monday by temporarily allowing Tehran’s top customers, including China and India, to continue to purchase crude from Iran without penalty.

Last May, US President Donald Trump abandoned the 2015 Iran nuclear deal.  At the time, Tump said he was walking away from the agreement signed by former President Barack Obama to thwart the Islamic Republic’s nuclear ambitions and its ballistic missile program as well as its support for militant proxies in Syria, Yemen, Lebanon and other areas in the Middle East.

For months after withdrawing from the pact, Trump said he would like to see Iran crude exports hit zero.  But recently, with oil prices on the rise and gasoline-price conscious voters heading to the polls for US midterm elections, Washington is shifting to a less hawkish position.

Eight countries, including China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey have all been granted exemptions and can continue imports, for now, without penalty.

“We have decided to issue temporary allotments to a handful countries responsive to the specific circumstances and to ensure a well supplied oil market,” said US Secretary of State, Mike Pompeo. “Each of those countries have already demonstrated significant reduction of the purchase of Iranian crude over the past six months.”

“More than 20 importing nations have zeroed out their imports of crude oil already, taking more than 1 million barrels crude per day off the market”.

He added “the regime to date since May has lost over $2.5 billions in oil revenue”.  One-third of Iran’s government revenues come from crude exports.

Crude exports from Iran peaked at 2.8 million barrels per day in April, including 300,000 b/d of condensate.  Since then, overall exports have fallen to 1.8 million b/d, according to Wood Mackenzie.  The energy consultancy firm expects Iran exports to eventually fall to 1 million b/d as a result of the sanctions.

Reuters reports that US officials say these eight countries will deposit Iran’s crude export revenue in escrow accounts that Tehran will be able to use to pay for humanitarian uses.

The waivers, along with rising production from the world’s largest crude producers, have recently dropped oil prices.

In October oil prices hit $85/barrel, but fell significantly since then and, as of 1:26 p.m., EST, Brent crude sits at $73.36/barrel.  US crude is at $63.46/barrel.

The Iran sanctions cover 50 Iranian banks and subsidiaries as well as over 200 people and vessels in its shipping sector.  Iran Air, over 65 of its aircraft are also included in the sanctions.

Iran has called the Trump sanctions “economic war”, and Tehran has vowed to defy the US move.  Meanwhile, Iranian clerical rulers have dismissed concerns about the impact of Iran sanctions on the economy.

“It will be difficult for Iran to maximize exports when virtually all trade in oil is cleared in US dollars, putting international oil companies, many national oil companies, traders and banks off limits,” Wood Mackenzie analyst, Homayoun Falakshahi told Reuters.