US passes sanctions bill to hit Iran’s oil exports

US passes sanctions bill to hit Iran’s oil exports

US passes sanctions bill to hit Iran’s oil exports

US new legislation provides for penalties for the countries who buy oil from Iran and do not find alternative supplies. REUTERS Photo

The House of Representatives easily passed a bill to tighten sanctions on Iran, showing a strong message to Tehran over its disputed nuclear program days before President-elect Hassan Rouhani is sworn in.

The vote also highlighted a growing divide between Congress and the Obama administration on Iran policy ahead of international talks on the nuclear program in coming months. Iran insists the nuclear program is purely for civilian purposes.

The bill, which passed 400 to 20 on July 31, would cut Iran’s oil exports by another 1 million barrels per day over a year, in an attempt to reduce the flow of funds to the nuclear program. It is the first sanctions bill to put a number on exactly how much Iran’s oil exports would be cut.

The legislation provides for heavy penalties for buyers who do not find alternative supplies, limits Iran’s access to funds in overseas accounts and penalises countries trading with Iran in other industrial sectors.

Turkey to struggle with oil import cut

Turkey would also struggle to cut its crude oil imports from Iran any further, a Turkish official said. However, Turkey, dependent on imported energy and, while it has cut back on oil purchases from Iran, has made clear it cannot simply stop buying Iranian oil and gas.

Previous U.S. and EU sanctions have reduced Iran’s oil exports by more than half. The United States has worked with Iran’s top oil consumers including China, Japan and South Korea to push them toward alternative suppliers of crude.

Oil prices have remained relatively steady, which has allowed the efforts to continue, but some analysts say further sanctions risk pushing up prices and damaging the economies of U.S. allies.

“This is almost like an embargo on Iranian oil imports. It is like giving Iran an ultimatum,” a Seoul-based refining source said, after the vote. “I think we can find alternatives but we prefer Iranian crude as the economics is better.

The bill still has to be passed in the Senate and signed by President Barack Obama before becoming law. The Senate Banking Committee is expected to introduce a similar measure in September, though it is uncertain whether the language to cut exports by 1 million barrels a day will survive.

Critics of the bill said it shows an aggressive signal to Iran that last month voted in Rouhani, a cleric many see as more moderate. He will be sworn in on Aug. 4.

Rep. Ed Royce, a California Republican and Chairman of the House Foreign Affairs Committee who introduced the bill with Rep. Eliot Engel, a New York Democrat, said the United States has no higher national security priority than preventing a nuclear-armed Iran. Royce said the Supreme Leader Ayatollah Ali Khamenei’s drive to develop a nuclear arsenal was evident. “New president or not, I am convinced that Iran’s Supreme Leader intends to continue on this path,” he said.

The Treasury Department last week partially eased sanctions on Iran by expanding a list of medical devices that can be exported there without special permission.

Asian states need to import oil from Iran

Trita Parsi, the president of the National Iranian American council, said the House action undermines the U.S. strategy which has long been one of good cop - bad cop. “I think it’s too much. Asian countries don’t have much oil resources and they need to import a lot from the Middle East,” said a trader with a North Asian buyer of Iranian crude. “If the United States keep pushing further, it would be a big burden for Asian refineries.”

While the bill has more steps to clear before becoming law, other buyers, apart from China, have already begun voicing their inability to reduce dependence on Iranian oil much further. “Cuts in our imports from Iran have been the maximum as compared to other Asian countries,” an Indian industry executive said.

India cut its Iranian oil imports by 43 percent over the first half of the year. That’s more than the 27 percent cut by South Korea and 22.5 percent by Japan.