US hits Iran with sweeping new set of sanctions

The US has imposed sanctions on 700 Iranian targets as part of its “largest ever single day” of economic penalties against Tehran, fulfilling Donald Trump’s campaign pledge to take a harder line against the Islamic republic.

The economic curbs target the Iranian oil, financial and shipping sectors as the US seeks to force Tehran to rein in what the Trump administration says are its destabilising activities in the Middle East.

Steven Mnuchin, US treasury secretary, said on Monday: "Today, the US is executing on the final actions to withdraw [from] the Obama administration's fatally flawed Iran deal.

“This is part of a maximum unprecedented economic pressure campaign that the US is waging against the world’s largest state sponsor of terror.”

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Mr Trump’s decision in May to pull out of a landmark nuclear deal with Tehran and reimpose sanctions has pitted the US against European powers, China and Russia, cosignatories to the 2015 accord.

In a fillip to Tehran, Washington on Monday named the eight countries to which it has granted six-month waivers to allow them to continue buying some Iranian crude: China, India, Japan, South Korea, Taiwan, Italy, Greece and Turkey.

Oil imports

The US said all had already cut oil imports from Iran but would not, crucially, reveal how much crude each buyer would be allowed to take under the exemptions.

Iran’s exports averaged about 2.5m barrels a day before the US decision to reimpose curbs. Exports rose to almost 2.9m b/d in April but have since fallen by about 1m b/d, as buyers, especially in Europe, have turned away.

Mike Pompeo, US secretary of state, said Washington’s goal was to force Iran to abandon its current course or else “see its economy crumble”.

State department officials said Iran relied on oil exports for 80 per cent of its revenues, and that the US would aim to reduce oil exports to zero in the coming months.

“We have more than covered the gap,” Brian Hook, the state department’s Iran lead, said on Monday of US efforts to ensure an increase in supply from Saudi Arabia, Russia and Iraq to outweigh the loss from Iran and keep world prices stable.

The imposition of sanctions on Iranian individuals, banks and businesses, as well as ships and aircraft, included 300 new targets. In all, the US has designated 50 Iranian banks and their subsidiaries for sanctions.

Mr Hook said the US had “every expectation” that European banks would halt business with these lenders, saying they would choose to do business with the US rather than with Iran.

In a further blow to EU efforts to defy Washington’s action, Swift, the international financial messaging system based in Belgium, said on Monday that it would comply with the restored US sanctions and suspend “certain Iranian banks’” access to its cross border-payment network.

This move further undermines EU efforts to maintain trade with Iran and save the nuclear deal with Tehran.

Comfort

Iran has been comforted by European governments’ continued support for the nuclear accord and EU efforts, as yet unfinished, to establish a new payments channel to facilitate the non-US trade with the Islamic republic.

With governments in Europe still talking over how to establish a payments channel, Iran's president Hassan Rouhani on Monday responded to the new US sanctions by claiming a diplomatic victory against Washington.

“Today, Iran is able to sell its oil and it will sell,” Mr Rouhani said. “We are in the economic war situation. We are confronting a bullying enemy. We have to stand to win.

“Yesterday, Saddam [Hussein] was in front us, today Trump is front of us. There is no difference. We must resist and win.”

Mohammad Javad Zarif, Iran’s foreign minister, cited the attempts to set up the payments channel, saying that Washington had been forced to take a step back from sanctions by issuing the waivers.

“The US allies [European countries] will create a special account and say they will not bow to US pressure,” he told Iranian MPs. “Whether they can do this or not is another issue . . . but it is the US allies who are putting [Washington] under pressure.”

While the US’s withdrawal from the nuclear deal and threat of new sanctions had rocked Iran’s economy, sparking a huge fall in the value of the rial, relative calm prevailed in Tehran on Monday.

The Tehran Stock Exchange index rose modestly, with some analysts suggesting that traders affiliated with the government had engineered price rises to show that sanctions had no impact on the market. The rial was stable. – Copyright The Financial Times Limited 2018