”Maximum Pressure” Campaign Fails To Kill Off Iran’s Oil Exports

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By Nick Cunningham, a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. Originally published at OilPrice

U.S.-Iran tensions are once again heating up, even as Iran has so far managed to stabilize oil exports at lower levels.

Iran has officially breached the limits of low-enriched uranium as part of the 2015 nuclear deal, according to inspectors with the International Atomic Energy Agency. A few weeks ago Iran announced its intention to increase uranium stockpiles, stating that it no longer made sense to remain in an agreement that the U.S. has already pulled out of. There is also little to gain for Iran to continue to adhere to the nuclear deal if it nonetheless faces crippling U.S. sanctions.

As a result, the Trump administration’s stated desire of its “maximum pressure” campaign – to constrain Iran’s nuclear ambitions – is predictably having the opposite result.

On Monday, the White House issued a statement, calling Iran’s decision “a mistake,” before bizarrely claiming that there “is little doubt that even before the deal’s existence, Iran was violating its terms.” Then, the statement went on to say: “We must restore the longstanding nonproliferation standard of no enrichment for Iran,” which, to be clear, was not the standard in years past.

Iranian foreign minister Javad Zarif mocked the statement on Twitter.

For his part, President Trump has gone back and forth, warning last month that Iran faced “obliteration” if the two went to war, while also saying that he was willing to meet and negotiate with Iran without any preconditions. He also notably pulled back from a military strike last month, to the chagrin of some hardliners in Washington. On Monday, as Iran breached uranium stockpile limits, Trump said Iran was “playing with fire.”

Notably, China and some officials from Europe were not pleased with Iran’s decision to breach limits of the nuclear agreement. French President Emmanuel Macron expressed “his attachment to the full respect of the 2015 nuclear accord and asks Iran to reverse without delay this excess, as well as to avoid all extra measures that would put into question its nuclear commitments.” Last week Macron warned Iran’s President that violating the terms of the nuclear agreement would be unwise. The UK voiced similar concerns.

Europe has tried to offer enticements to keep Iran within the terms of the nuclear deal, setting up a special financial entity to allow European companies to continue to do business with Tehran. But Iranian foreign minister Zarif said that the efforts are insufficient, especially since it does not allow Iran to continue to export oil. “The Europeans’ efforts were not enough, therefore Iran will go ahead with its announced measures,” Zarif said last week, referring to its plans to breach the stockpile limits.

On Monday, he went further. “Our next step will be enriching uranium beyond the 3.67% allowed under the deal,” he said. “The Europeans have failed to fulfil their promises of protecting Iran’s interests under the deal.” However, he also noted that Iran’s actions were “reversible,” suggesting that Iran could pullback if European efforts proved more fruitful.

“Without oil deal, it’s very clear, Instex will not work,” Iran’s oil minister Bijan Namdar Zanganeh said in a Bloomberg Television interview in Vienna on Tuesday, referring to the financial vehicle setup by the EU.

But the U.S. maximum pressure campaign makes it very difficult for either side to find a way to deescalate. In fact, there is a certain self-fulfilling logic that hawks in Washington are doubtlessly counting on. By ratcheting up the pressure to such an intense degree, it leaves Iran little choice but to bail on the nuclear deal and pursue more confrontational measures. That, in turn, paints Iran as the villain, which may erode support for Tehran.

Russian energy minister Alexander Novak said on Tuesday that Iran was not at fault. “As regards restrictions on Iranian exports, we support Iran and we believe that the sanctions are unlawful; they have not been approved by the UN,” Novak told CNBC’s Dan Murphy in Vienna, according to a translation.

Yet, it is clear that European governments, which have gone to bat for Iran, are losing faith in the nuclear deal and are feeling pressure to denounce Iran’s enrichment plans, which they did in a series of official statements. Time is running out. A “deadline that Iran set for Europeans to ensure the sale of oil will expire at the end of this week,” Commerzbank wrote on Tuesday. “Following that deadline, Iran intends to suspend further sections of the nuclear agreement, which could prompt Europeans to adopt the hardline US sanctions route and thus result in a further decline in Iranian oil exports.”

Iran’s gamble that its own escalatory moves will force Europe into action may have the opposite effect. As such, the current dynamic has the U.S. and Iran on a course of escalating tension, with minimal chance of a resolution.

Still, despite the heightened tension, Iran has managed to keep oil exports from collapsing to zero. As the New York Times reported, some oil tankers have recently resorted to switching off their transponders as they enter the Persian Gulf, likely loading up with Iranian oil and then heading out towards markets in Asia. The U.S. has threatened companies that violate sanctions, but so far it has been unable to take Iran’s oil exports to zero, as promised.

According to the IEA’s June Oil Market Report, Iran’s oil production was 2.4 million barrels per day in May, down 210,000 bpd from a month earlier. Exports fell more sharply to 810,000 bpd, down 480,000 bpd from April. “The final destination of Iran’s oil exports is becoming increasingly difficult to track after the National Iranian Oil Co (NIOC) shut off the satellite tracking systems on its ships,” the IEA wrote. “Most of the barrels are expected to wind up in Asia, although it is still unclear where, and some oil is probably moving into storage tanks.”

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33 comments

  1. Ignacio

    Thus, France and UK, the two european countries that have nuclear bombs, are the most offended by Iran enrichment goals that “break” a treaty that was already dead. When it is so dificult to discern between theatric and real moves nothing good can be expected. This is really worrying.

    Reply
  2. fdr-fan

    It’s impossible to “breach” a contract that was already voided by one of the parties. If I agree to buy your house after you make specific repairs, and then I refuse to pay, you are no longer obligated to make the repairs.

    Reply
    1. Geo

      Well said. I’d only add that it’s like if you refused to pay but threatened to burn down the house if I don’t make the repairs anyway.

      Reply
  3. Polar Socialist

    The most amazing thing in this “breach” is the fact that it’s completely due to France, UK and Germany not buying the enriched uranium because of the US embargo. Iran notified all parties in good time, that if they don’t fulfill their obligations (to buy the stuff), Iran will have to store more enriched uranium that the deal allows for.

    Should these countries buy the uranium, Iran would immediately revert to not “breach” the deal. They have communicated this loud and clear, yet it doesn’t seem to be clear.

    So, let’s reiterate the situation: Iran has a right to enrich uranium, and store certain amount. European countries then purchase that uranium, so the stores are kept under the limit. The US says there will be trouble if uranium is purchased, and the stores raise above the limit.

    Reply
    1. Darius

      It cannot be overstated that Iran is forced to stockpile uranium because Trump has banned Iranian exports of uranium. So the whole matter is made up. Not surprising that David Sanger left that part out of his “Iran is breaching the nuclear deal!” story in the New York Times story.

      Reply
    2. Michael

      Agreed!

      Not only that, but the European powers by going along with the oil embargo are violating the terms of the treaty, which makes them just as culpable as the US, and not one to ask Iran to execute anything to attempt to stay within the treaty. Iran has no obligation to attempt to meet the terms of the agreement, while Europe is in clear violation.

      The treaty is null and void by no fault of Iran.

      Reply
      1. Procopius

        Minor quibble: it’s not a treaty. It’s an international agreement, because Obama recognized that the McConnell senate would never ratify it as a treaty. Something else never mentioned in the American media is that there is a disagreement settlement provision in the agreement. Iran submitted a grievance under that mechanism and was found to be in the right.

        Reply
    3. rd

      I believe Trump expects Iran to voluntarily shut down their entire economy by shutting their nukes and meekly not selling oil.

      Trump, of all people, should understand that threatening somebody’s manhood is generally not a preferred negotiation method.

      Going back in history, sanctions and embargoes rarely are successful unless there are fundamental internal imbalances at a tipping point. At the extreme, similar moves in the Pacific in the 1930s made Japan think they had to go to war.

      I don’t think Iran wants a war but they may be forced into it if the US attacks. Iran will probably respond with asymmetrical warfare that could set many areas in the Middle East ablaze (that aren’t already burning now). How does that help the US?

      Reply
  4. timbers

    What if Russia and China loudly consider doing a deal with Iran to arm it with nuclear weapons and to make Iran nuclear weapons production capable? What if they state clearly and distinctly the reason for this: So that Iran can defend herself against the U.S. and Israel aggression?

    IMO the world needs multi-polarity to remain peaceful.

    Reply
    1. Sushi

      Russia would probably avoid that scenario since they already had their own problems with Afghanistan in the neighborhood and have those restive Muslims around the old SSRs. China has its Uighur citizens that would be fifth-columnist candidates for a Persian, or someone else, bent on stirring up more trouble.

      Reply
      1. timbers

        That is one view.

        My view is Russia can and should make it’s “problem” in Afghanistan American’s much greater problem.

        I don’t think Russia/China holding back will not restrain the U.S. from exploiting to the max any Muslim problems Russia and China have. Look what the U.S. did in Ukraine.

        The best defense is a strong offense. These are not reasons for Russia/China to hold back and defer to the U.S. The U.S. will use any problems they have to it’s advantage no matter how passive or deferential Russia and China remain.

        Time for Russia/China to embrace the multi-polar world, not run from it.

        Reply
        1. John Merryman.

          Keep in mind the US is intent on digging its own hole in the Middle East and Europe will fall in it as well, with more floods of angry refugees and Russia as the only source of oil. Their best strategy is to wait and see.

          Reply
          1. timbers

            Huh? The U.S. is seeking to terminate Russian energy to Europe and replace it with American No, prudence indicates Russian China act now.

            Reply
  5. Brooklin Bridge

    A better title would have been, European hypocrites get nose stuck in US’ Ass and dizzy, go sanctimonious betraying Iran deal.

    Reply
  6. Norb

    There is a view that offensive war is the foundation and precursor of all other crimes. US policymakers seem to agree with that assessment, and try with all their might to portray their actions as somehow being a response instead of the provocations that they are. What is truly amazing is the willingness of the American public to still be fooled by these attempts at aggression as somehow being defensive reactions against foreign enemies.

    What Americans should really be concerned about is the psychological condition the neocons have created in the country. On one had you have a large segment of the population terrorized by imaginary phantoms. On the other, large swaths totally unconcerned or ignorant of the true horrors of war- real war. If that day should ever arrive, I would speculate that this group would be completely unprepared and unable to deal with the consequences. A traumatized person needs time to reorient themselves. Time that a true enemy will exploit to the fullest.

    China, Russia, and Iran have been preparing for war and directly say they are ready for it. If one is to give these countries and their people the respect they deserve, Americans should take these statements seriously and ponder the consequences of more political miscalculations. Americans loose- war profiteers gain. The country as a whole becomes weaker- not stronger. America excels at hollow “Victories”.

    The elites driving these policies seem to believe that a world fragmented into waring factions will benefit them indefinitely and for all time. The downside of overusing divide and conquer tactics, is that sooner or later strong coalitions do form in response to the attacks.

    These are interesting times in that fundamental social change is at hand- if people recognize it or not. In 30 years, one way or the other, humans will find themselves living in a completely different world. Muddling along, and allowing people who are proven wrong time and time again cannot continue much longer.

    A conflict with Iran will topple our fragile social structure.

    Reply
    1. Peter

      Iran’s war with Iraq is not that long ago and still alive in the populaces memory. Russia had a devastating war and a smaller one in Chechnya with Muslim jihadists, which also affected the population directly like the several terrorist action in Beslan, Moscow etc.. China also had direct experience with war in WW2 with Japanese occupation and then the civil war.
      The US did not have a war on its soil since the civil war, so they are completely clueless what that means and its devastating impact on an economy.
      It is one thing to send the soldiers overseas and have them fight with weapons produced in the unaffected homeland, with profiteers raking in the dough – it is another thing to have the homeland with its infrastructure destroyed.

      Reply
      1. drumlin woodchuckles

        Much American infrastructure has been slow-motion destroyed over the last 50 years by the International Forcey-Free-Trade Conspiracy.

        Millions of Americans have nothing left to lose. Why would war frighten them? Perhaps a war which destroyed Coastal Elitistan down to Abandoned Rustbelt levels would provide the Bitter Rustbelters some Schadenfreudian amusement.

        Reply
        1. Procopius

          Millions of Americans have nothing left to lose.

          Trust me, you’re wrong. I was in the Air Force in Korea in 1956. Americans do not have any idea what it’s like to be in a city devastated by war. At that, Seoul had already had five years of recovery, so what I saw was nowhere near the worst.

          Reply
  7. Thuto

    I’m all for total nuclear disarmament but still the question has to be asked: Why are some nations allowed to have nukes (hell the US political establishment, even as it froths at the mouth about the need to prevent Iran from getting “the bomb”, are modernizing their nuclear arsenal) yet others, Iran and DPRK, are to be prevented at ALL costs from obtaining them? Is it because the righteous indignation we see on display stems from plain old racialized prejudices? In other words “we can’t trust those morally inferior Persians and North Koreans to keep their worst proclivities in check and not burn the whole house down” once they have access to the nukes. And why is Israel’s nuclear arsenal never discussed?

    Reply
    1. fajensen

      “we can’t trust those morally inferior Persians and North Korean

      Isn’t Projection just great: The only accessible “model of mind” that we have is our own. So, anything one speculate that others will do in a given situation is really an answer to the question: “What would *I* do in a given situation”.

      Now we have gone and placed nutters like Bolton in charge of things and then we go and ask for their “expert opinion” on “What would Iran do with nukes” and the answer we actually get is: “What would Michael Bolton do if he had nukes”!

      Reply
  8. Susan the other`

    If body language informs us, Rouhani looked so angry and determined it conveyed a willingness to do whatever was necessary to save Iran from the torture we impose on her. He had a certain resolve in his expression. Much like the leader of the Quds (sp?) force. For us to push Iran into this corner is both foolish and sadistic. They are a modern, civilized, technologically proficient society. They should not be treated this way. The ostensible objective of this siege is to prevent Iran from manufacturing refined uranium because it can be used for weapons. So why do we boycott their oil? Nukes look like a ruse. We want to contain Iran because it has the capacity to interfere to the financial detriment of the Saudis and the Israelis. And I don’t think anyone can overlook the possible benefits to Armco of actually appropriating the Iranian oil industry and gaining access to the Caspian. There Iran sits. Surrounded. Unable to sell anything. This is what our policy of “perpetual war” is all about. We will hold siege on Iran until hell freezes over. Unless we can all get real, discuss what we are actually doing here. And start over with a fair deal for Iran. And to that end we really should stuff a sock in Netanyahu. And the Ayatollah isn’t helping much either.

    Reply
    1. polecat

      Iran is also a stair-stepp away towards a potential confrontation with the Russian State proper .. be it open or clandestine, or both ! Keep that also in mind …

      Reply
    2. templar555510

      Right . Forget Trump . Bolton, the numbskull, thinks Iran is just one more third world country that cn be invaded at will . Iran is nothing of the sort . It is not Arab for a start . It is all the things you say about her. This is going to break down with the US being the battered side . Deals are being done to enable Iran to sell her oil no matter what sanctions the US thinks it has imposed on her. And as a result bit by bit the very thing the neocons want to protect at ANY price, the hegemony of the dollar, collapses. Every move the US makes at home and abroad right now is the wrong one. That’s how every empire falls.

      Reply
    3. chris drake

      Trump’s neocons aren’t motivated only the desire to control Iran’s oil and to deprive Iran of missiles that could reach Saudi Arabia and Israel and thus be used by Iran to protect itself against those two countries. At the moment it’s said that a major aim of the economic war on Iran is to prevent Iran from joining China’s New Silk Road project. Iran plans to play a major role in the New Silk Road, and the neocons are planning to do everything possible to disrupt that project. Among the many reasons for US opposition is that the New Silk Road will allow Europe to trade and interact more directly and freely with China and Central and East Asia and thus free itself from its current domination by the US. Of course that’s also the major reason the neocons oppose Trump and want to continue the wretched war in Afghanistan.

      Reply
  9. Chris Smith

    I think the Europeans got it wrong when they went along with the US secondary sanctions. That was probably the moment to stand up and say “We will not accept your sanctions. If you sanction us or our companies we will sanction you and yours back twice as hard.” And then do it.

    Yes, this would cause economic pain in the short run. But unless Europe is willing to capitulate to the US for forever more, that pain is inevitable. Best to get it over with now.

    Just my thought, but I could be wrong.

    Reply
    1. Tim

      Earlier today I made a post suggesting some practical ways of the EU sanctioning “back” US and NY state government officials in retaliation. Apparently though it wasn’t appreciated by the site mods in particular my mentioning of NC past support of sanctions enforcement during the Obama Administration and the general anti bank anti business sentiment on NC back in those days.

      Reply
  10. barrisj

    A nuclear-armed North Korea presents a continuing existential threat to US “allies” Japan and South Korea, but Trump can’t be bothered, as Mr Kim is his big mate – oh, and PRNK has no oil…Iran has no nuclear weapons, but deemed an “immanent threat” to US “allies” KSA and Israel, and Trump wants to burn it to the ground – and, yes, Iran has oil. See the difference?

    Reply
    1. fajensen

      The real nuclear existential threat to the USA is all the nuclear waste that has been stockpiled in “temporary” facilities all over the USA and thus must be managed for hundreds of years into the future. The overwhelming odds are that systems will decay and then this stuff will leak, poisoning the land.

      OTOH – After it leaks, maybe there will suddenly be money available to properly dispose of the rest of the stuff!

      Reply
  11. RBHoughton

    I think the great difficulty for those states that support non-proliferation is their mixed record. It was President Nixon who authorised Israel’s acquisition of the bomb and UK, France and Norway all helped with the necessary supplies and expertise. At that time (early 1970s) Israel was a member of the axis of evil with South Africa and Taiwan and its a nice question how far the knowledge was shared. South Africa appeared to test a bomb but the ANC gave up its use after the Nationalists were removed. No-one talks about Taiwan.

    Then A Q Khan and President Bhutto stated their belief that having nukes was a fair aspiration for a country to express. President Reagan, who needed Pakistan on-side to get supplies to his army in Afghanistan, agreed. The CIA section that was tracking the proliferators was shut down, its leading man sacked without pension, the arrested salesman released and the nuclear proliferators were left undisturbed. Iran, Libya, Iraq and North Korea (maybe some Arab states) then all received offers of the technology.

    So when we talk about non-proliferation we have a dodgy record and what appears to be the situation is that many countries (including Canada, Australia and New Zealand whose scientists collaborated in the original research) all know how to make a bomb should the need arise. I have no doubt that Germany and Japan are equally capable as well as Turkey and the Netherlands. We really need the IAEA to open its files and invite proposals for dealing with a nuclear-enabled world.

    Reply

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