Sweeping Iran sanctions target oil, banks

2018-11-02 11:02

All of Iran's oil exports and financial transactions will be targeted under US sanctions that take force on Monday, six months after US President Donald Trump bolted from a nuclear deal.

The sanctions bring back the punitive measures that were imposed and then lifted by former president Barack Obama who reached an international agreement under which Iran moved to end its nuclear programme.

While European powers believe the deal has been successful and have sought to preserve trade with Iran, most major companies have chosen to exit the country rather than incur the wrath of US authorities.

READ: Iran says it doesn't want war with the US

Sanctions already re-imposed -

On August 7, the first sanctions lifted under the 2015 nuclear deal came into force, banning:

- The Iranian government's purchases of dollars, or the international buying and selling of significant sums of rials, Iran's under-pressure currency

- Purchases of Iranian treasury bonds

- Trade in gold or other precious metals, aluminium, steel, carbon or graphite

- Automobile and commercial aviation trade

- US imports of Iranian carpets or foodstuffs

Sanctions come into force Monday -

The toughest of the Obama-era sanctions lifted under the 2015 nuclear deal will come back, including bans on:

- Energy sector sales including oil. The Trump administration says it aims for Iranian oil exports to be "as close to zero as possible" but the US will likely give at least temporary reprieves to countries that cut but do not end purchases.

Iran will likely still export oil, its main commodity, in some form. Iran could mix its oil with crude from neighbouring Iraq, sell on the black market or try a barter system supported by the Europeans.

Another key pressure point will be the price of oil, which is politically sensitive in the United States.

The reduction in Iranian crude would likely bring up global prices. Saudi Arabia could make up the difference; while the kingdom has threatened to use oil in retaliation for international punishment over its killing of journalist Jamal Khashoggi, it also is eager to squeeze Iran, its regional rival.

- Financial transactions. Starting on Monday, any foreign institution that does business with Iran's central bank or other banks in the country will lose access to the US financial system. The risks for foreign banks are high in a globalised economy in which the dollar remains the dominant currency.

One unresolved issue is whether the US will press to disconnect Iranian banks from SWIFT, the international system of interbank transfers headed in Belgium.

US hardliners want to press ahead on SWIFT, but others argue to keep the option as a bargaining card with the Europeans and say that SWIFT access remains useful in tracking Iranian transactions.

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