The first set of strict U.S economic sanctions against Iran took effect midnight Tuesday and target transactions that involve U.S. dollars, as well as the country’s automotive sector, the purchase of commercial planes and metals including gold. Another set of sanctions scheduled for November, will bring U.S. sanctions against Iran to a level on par with those prior to a major multilateral nuclear deal reached in 2015.
President Trump on Monday signed an executive order to restore some of the sanctions that were lifted under the 2015 nuclear deal during the Obama administration.
The White House said in a statement Monday that the United States will reactivate a slew of sanctions on Iran’s financial and industrial sectors beginning Tuesday.
The first batch of sanctions target Tehran’s purchase of US banknotes, trade in gold and other precious metals, as well as the use of graphite, coal, aluminum and steel in industrial processes.
Another round of sanctions, to be reinstalled in November, will be on Iran’s port, energy and shipping sectors, its petroleum-related transactions, and foreign transactions with the Central Bank of Iran, according to the statement.
Many other countries, including US allies in Europe and also China and India oppose the introduction of new sanctions, but the US government said it wants as many countries as possible to stop buying Iranian oil.
“It is our policy to get as many countries to zero as quickly as possible. We are going to work with individual countries on a case-by-case basis, but our goal is to reduce the amount of revenue and hard currency going into Iran,” said a senior US administration official on Monday.
Iranian President Hassan Rouhani responded Monday, “If someone has knife in the hand and seeks talks, he should first put the knife in his pocket.”
Rouhani said he has no pre-conditions for opening talks with the U.S. as long as the Islamic Republic gets paid back for decades of American “intervention in Iran.”
“If the U.S. government is ready to negotiate about paying compensation to the Iranian nation from 1953 until now,” Rouhani said. “The U.S owes the Iranian nation for its intervention in Iran.”
Rouhani appears to be referencing the CIA-backed mission to overthrow Iran’s elected prime minister to secure the shah’s rule in 1953, a similar sentiment touted by many of his predecessors.
The European Union’s (EU) foreign service on Monday said in a statement that it deeply regrets the restored U.S. sanctions against Iran.
“We deeply regret the re-imposition of sanctions by the U.S., due to the latter’s withdrawal from the [2015 Iran nuclear deal],” the EU foreign service said in the statement.
“It is a key element of the global nuclear non-proliferation architecture, crucial for the security of Europe, the region, and the entire world.”
“The remaining parties to the [nuclear deal] have committed to work on, inter alia, the preservation and maintenance of effective financial channels with Iran, and the continuation of Iran’s export of oil and gas,” the EU continued.
After its withdrawal from the JCPOA in May, Washington has been trying to bring sanctions back on Iran with the aim of blocking Iran’s international financial transactions and reducing its oil exports to zero.
Under the JCPOA, Iran agreed to limit its nuclear program in exchange for the removal of nuclear-related sanctions.
Since U.S. President Donald Trump pulled out of the nuclear deal, European countries have been scrambling to ensure that Iran would get enough economic benefits to persuade it to stay in the deal.
The State Department in recent weeks has launched a pressure campaign against the Iranian government, calling its leaders corrupt and even “mafia”-like while supporting those protesting it on the ground.
Trump last month on Twitter issued an all-caps threat against Iranian President Hassan Rouhani, warning his country “will suffer consequences the likes of which few throughout history have ever suffered before” if Rouhani continued to issue threats against the U.S.
Trump’s tweet came in response to Iranian President Hassan Rouhani’s claim that aggressive actions by the U.S. against Iran could lead to the “mother of all wars,” while a peaceful strategy in the region could result in “the mother of all peace.”
Oil markets started cautiously in Asia on Tuesday, as many traders were reluctant to take on new positions ahead of the introduction of US sanctions against major crude exporter Iran.
Spot Brent crude oil futures LCOc1 were at 73.74 US dollars per barrel at 0100 GMT on Tuesday, down 1 cent from their last close.
US West Texas Intermediate (WTI) crude futures CLc1 were down 8 cents at 68.93 US dollars barrel.
US sanctions against major oil exporter Iran are set to kick in at 12:01 a.m. US east coast time (0401 GMT) on Tuesday.
Traders in Asia said they were holding back on making bets on oil ahead of European and US trading hours, which tend to see much higher liquidity and stronger price movements.
“The US seems hell-bent on regime change in Iran and is reimposing sanctions at midnight Washington time as the 6th becomes the 7th of August,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Meanwhile, ANZ bank said a 24-hour pay strike at three North Sea oil and gas platforms operated by Total, which started at 0500 GMT on Monday, was also supporting prices.
The main oil market price drivers of recent months have been output levels by top producers Russia, Saudi Arabia and the United States, renewed Iran sanctions, the US vs China trade dispute, and unplanned supply disruptions. Some analysts warned that a global heatwave could also now affect oil demand.
Much of the northern hemisphere has been gripped by extreme heat this summer, pushing up demand for industrial and residential cooling.
This mostly impacts demand for power fuels like thermal coal and natural gas.
US bank JPMorgan said a warmer than usual fourth quarter, caused by a potential El Niño weather pattern, “can cause droughts, flooding and other natural disasters across the globe, including heatwaves in the US that affect commodities.”
“Past instances of El Niño have resulted in sharp drops in US residential and commercial heating oil demand and prices,” it said.
EU’s updated Blocking Statute takes effect as countermeasure to U.S. re-imposed sanctions against Iran
The European Union (EU)’s updated Blocking Statute also goes into force Tuesday as a countermeasure to Washington’s re-imposed sanctions against Iran, the European Commission announced it on its website on Monday.
The statute, introduced in 1996 in response to U.S. extra-territorial sanctions legislation, was amended on June 6 by adding within its scope the list of extra-territorial U.S. sanctions on Iran.
As neither the Council of the EU nor the European Parliament voiced their objection to the amendment in the two-month scrutiny period, the statute will kick in as of Tuesday, one day after the United States resumes its first batch of sanctions against Iran.
The statute forbids EU residents and companies from complying with the listed U.S. extra-territorial sanctions legislation unless they are exceptionally authorized to do so by the Commission.
The statute also allows EU companies to “recover damages arising from such legislation from the persons or entities causing them, and nullifies the effect in the EU of any foreign court rulings based on it.”
According to the statute, EU operators can recover any damages, including legal costs.
To claim compensation, EU operators can bring the case before the courts of EU member states. The recovery can take the form of seizure and sale of the assets of the person causing the damage, its representatives or intermediaries.
EU Foreign Policy chief Federica Mogherini, who is currently on an official trip to Asia, issued a joint statement Monday with the foreign ministers of Britain, France and Germany, saying they “are determined to protect European economic operators engaged in legitimate business with Iran.”
Stating that the Iranian nuclear agreement, also known as the Joint Comprehensive Plan of Action (JCPOA), is working and delivering on its goal, they stressed that the deal “is a key element of the global nuclear non-proliferation architecture, crucial for the security of Europe, the region and the entire world.”
“This is why the European Union’s updated Blocking Statute enters into force on Aug. 7 to protect EU companies doing legitimate business with Iran from the impact of U.S. extra-territorial sanctions,” the officials said.