New, toughest phase of Iran sanctions begins on Monday

WASHINGTON DC (Kurdistan 24) – On Friday, senior US officials described in detail the next phase of international sanctions on Iran that will start at midnight on Monday.

The sanctions target Iran’s oil, banking, and shipping sectors. States that are not in compliance will be subject to secondary US sanctions, although Washington has provided for temporary waivers—“Significant Reduction Exemptions” (SREs) to be issued for renewable six-month periods.

The SREs are for countries dependent on Iranian oil imports and which have made a substantial effort to reduce such purchases.

Eight countries will receive SREs, and two are so close to ending their imports of Iranian oil that they are expected to end such purchases “within weeks,” Secretary of State Mike Pompeo explained.

He, and other US officials, declined to identify any of those countries on Friday but said they would do so on Monday.

However, Turkey’s Energy Minister said that his country would receive an SRE.

Iraq will also receive a waiver that will allow it to continue importing food, along with gas and other energy supplies from Iran, Reuters reported, citing three Iraqi officials.

However, Iraq will be obliged to pay Iran in Iraqi dinars rather than US dollars, with the money to be kept in an escrow account for humanitarian purchases. The same conditions, presumably, would also apply to the Kurdistan Region.

It is also speculated that China, Japan, India, and South Korea will also receive waivers.

Iran will not be free to spend the money it receives from countries that continue importing its oil. Rather, those funds will go into a special escrow account in the national bank of the importing country. Iran will be allowed to use that money only for humanitarian purposes, while the US will be monitoring those accounts.

Although the sanctions have yet to begin, Iran is already feeling their effect. In a statement issued by President Donald Trump, he noted that over the past year, Iran’s currency has “lost about 70 percent of its value.”

“Iran’s economy is sliding into recession,” while the inflation rate has “nearly quadrupled since May,” reaching 37 percent last month, Trump explained.

“More than 100 companies” have stopped doing business with Iran, and “we expect that number to grow,” he continued.

They include major US firms, such as Boeing and General Electric, as well as European companies like Peugeot, Renault, Siemens, and Total, despite the European Union’s efforts to maintain the nuclear deal and insulate Iran from the effect of the new sanctions.

Pompeo noted that the US measures have already reduced Iranian oil exports by one million barrels a day, even before the sanctions go into effect. That is “three to five times more than what many analysts” expected, he said, and represents a 40 percent decrease from Iran’s earlier export of 2.5 million barrels a day.

Pompeo also noted that this reduction of Iranian oil exports had been accomplished without an increase in oil prices: the price for benchmark Brent crude remains unchanged from May, when the US withdrew from the Iranian nuclear deal, he said.

So far, Iran’s response has been relatively mild. It is downplaying the anticipated effect of sanctions and highlighting the eight waivers, suggesting that they show that the US has failed in its objective of cutting off all Iranian oil exports.

Iran’s muted response to the new sanctions could change quickly, however. And particularly given its extensive terrorist activities, Tehran could resort to such attacks, whether directed at US targets or at US allies, such as Saudi Arabia, whose increased oil production is helping to compensate for the cut-off of Iranian supplies.

Editing by Nadia Riva