Published: Mon, May 14, 2018
Money | By Armando Alvarado

Reintroduction of USA sanctions on Iran sets alarm bell ringing in Delhi

Reintroduction of USA sanctions on Iran sets alarm bell ringing in Delhi

OPEC, however, is in no hurry to decide whether to pump more oil to make up for an expected drop in exports from Iran, four sources familiar with the issue said, saying any loss in supply would take time.

Trump's decision could eventually mean less oil on the world market from Iran because now the US will reimpose economic sanctions on Iran that were lifted as part of the 2015 deal.

New sanctions will likely include measures against Iran's oil and shipping sectors, said Ehsan Khoman, head of research for Middle East and North Africa at Mitsubishi UFJ Financial Group, with 180 days for those industries to adjust.

Nonetheless, the Europeans were taken aback by the expansiveness of Trump's effort to tear up the JCPOA by fully reinstating all previously existing sanctions against Iran, and showing no regard for companies that concluded business deals in Iran on the belief that the JCPOA was accepted global policy, endorsed and affirmed by the United Nations Security Council.

The lion's share of Iran's oil exports, more than 1.5 million barrels per day (bpd), goes to Asian countries, and the reaction of China, Japan, India and South Korea to these new sanctions will be key to their impact.

Exports of German goods to Iran rose by around 400 million euros to 3 billion euros. "We expect that around October Iranian exports will be down by 500,000 barrels per day and eventually fall by 1 million bpd in 1H19", said United States investment bank Jefferies in a note on Friday.

Analysts now expect Iran's supplies to fall by 300,000 bpd to 1 million bpd, depending on how many other countries fall in line with Washington. In 1997, in the face of European action at the World Trade Organization, the US compromised by suspending the law's most onerous provisions.

Oil prices steadied near 3-1/2 year highs on Friday as the prospect of new US sanctions on Iran tightened the outlook for Middle East supply at a time when global crude production is only just keeping pace with rising demand.

The Italy/Germany 10-year government bond yield spread widened five basis points immediately after news that 5-Star and the League had said they were holding last-minute talks to try to clinch a coalition deal.

Similar sentiments prevail in Asia.

Under the terms of that deal, the U.S.is permitted to reinstate sanctions if it alleges that there has been significant non-performance of the obligations of another participant to the deal. He added that Japan would "carefully analyse the impact that this announcement would have". In fact, in February this year, Iranian president Hassan Rouhani came to New Delhi with his oil minister Bijan Zanganeh to deepen strategic relations. France has been among the most vocal critics, after French banking giant BNP Paribas was fined almost $9 billion in 2014 for violating US sanctions on Iran, Sudan and Cuba.

What are the origins of the Iranian sanctions? .

Iran foreign minister sets off on tour to save nuclear deal
The deal allowed Iran to reconnect the machines and eventually build an industrial-scale enrichment program starting in 2025. Media captionWhat is the Iran nuclear deal? He will later head to Moscow and Brussels .

This would make the United States the world's largest producer, ahead of both Russian Federation and Saudi Arabia.

OIL: Prices of oil fell sharply before Trump's announcement but rebounded, with benchmark US crude oil jumping $1.58 to $70.64 per barrel in electronic trading on the New York Mercantile Exchange.

Since the sanctions were lifted in 2016, major European companies, partly wary of the remaining USA sanctions on Iran, have been reluctant to do business with Tehran, which needs to attract over $100 billion in foreign investment to boost its crude output.

But Chinese refiners said there were alternative suppliers, especially in Russia, Saudi Arabia and West Africa.

"The oil supply/demand balance is roughly in balance now, but it could turn to a complete supply shortage (in case of new supply curbs)". This will mean that, after a period to give companies and individuals time to unwind their dealings with Iran, the USA will once again threaten to punish foreign individuals and companies that do business with Iran in ways the US deems aids its nuclear development.

European companies with interests in the United States "find it is impossible to hide from the world's policeman" said Jacques Hogard, who runs an worldwide consulting firm.

China remained the largest export destination for Iranian oil, with flows rising to 714,467 b/d in April, up just over 20,000 b/d from March.

This - along with an output cap by Russian Federation and OPEC, rising U.S. demand and an improving economy - has helped send the price of oil to highs not seen since late 2014, though profit-taking saw both main contracts retreat yesterday. "They worked last time".

"I think we're going to $80", said Eric Nuttall, senior portfolio manager at Ninepoint Partners in Toronto, referring to the benchmark crude oil price.

Several US military officials told CNN that there are increasing concerns Iran is on the cusp of an attack against Israel.

The threat of new sanctions comes amid an oil market that has already been tightening due to strong demand, especially in Asia, and as top exporter Saudi Arabia and No.1 producer Russian Federation have led efforts since 2017 to withhold oil supplies to prop up prices.

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