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US Secretary of State Mike Pompeo (left) and Secretary of the Treasury Steven Mnuchin announce the adoption of sanctions against nations that import Iranian crude oil in November 2018. (EPA/Yonhap News)
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White House says aim is to cut off Iranian regime’s principal revenue source
The US has decided that on May 2 it will end the temporary waivers it extended to certain countries, exempting them from sanctions on importing Iranian crude oil. “President Donald J. Trump has decided not to reissue Significant Reduction Exceptions (SREs) [that is, the waivers] when they expire in early May,” the White House said in a statement issued on the morning of Apr. 22. “This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” the White House said in the statement. This decision means that the eight countries granted relief from the sanctions – namely, South Korea, Japan, China, India, Turkey, Italy, Greece, and Taiwan – will be blocked from importing Iranian crude oil starting next month. The US’ unilateral plan to pressure Iran by shutting down its exports of petroleum is taking full effect, five months after it was unveiled. The news caused global oil prices to spike and is expected to have an impact on the South Korean petrochemical industry, which has depended on Iranian condensate, an ultralight form of crude oil. In May 2018, the US withdrew from the Iran nuclear deal, which it had crafted with the other permanent members of the UN Security Council, and reimposed sanctions on Iran. Then in November, it banned other countries from importing Iranian crude oil, on penalty of sanctions. But South Korea was one of just eight countries that received a temporary waiver from the sanctions, lasting six months. On a visit to Washington, DC, early this month, South Korean government officials asked the US to be flexible about the sanctions, but in the end, the US decided not to extend the waivers. Total embargo on Iranian oil to cause global price hike and impact S. Korean economy The US’ decision not to extend the waivers on sanctions for importing Iranian crude oil is regarded as a victory for hardliners in the US, represented by White House National Security Advisor John Bolton, who are trying to bring Iran to its knees. The US is attempting to cut off the flow of cash to the Iranian regime by reducing its revenue from exports of crude oil, its principal revenue source, to zero. While the Trump administration claims that the reason it’s ratcheting up pressure on Iran is to change the country’s behavior, not its regime, US newspapers and experts believe that hardliners inside the Trump administration hope to engineer the collapse of the country’s Islamic theocracy. On Apr. 8, Trump designated the Islamic Revolutionary Guard Corps, a branch of Iran’s army, as a “foreign terrorist organization.” That’s the reason for growing concerns that, in the long term, tensions in the Middle East will increase and international oil prices will rise. “Previously, the US had promised to maintain the sanctions waiver if we met the requirement of reducing our imports of Iranian crude oil, but it has abruptly changed its attitude by announcing that it will no longer recognize the waivers,” said a diplomatic source. This appears to be the decision of hardliners inside the US government, who have concluded that the sanctions against Iran are having an effect. UN Security Council sanctions on Iran remain suspended under the terms of the Joint Comprehensive Plan of Action (JCPOA), which was signed by Iran and the five permanent members of the UN Security Council and Germany, a grouping known as “P5+1,” in 2015, during the Obama administration, but the Trump administration reinstated the US’ unilateral sanctions while withdrawing from that agreement in 2018. Since then, economic conditions in Iran have worsened amid rising inflation, the country’s currency plummeting in value. Sanctions only strengthen position of Iranian hardliners Paradoxically, however, the sanctions are only strengthening the position of hardliners in Iran. Iranian workers have held protests because of the economic crisis, but Iran’s conservatives are strengthening their grip on power by blaming the US for the economic difficulties. The hardliner Ebrahim Raisi is on the rise, recently becoming the head of Iran’s judiciary and the first vice chairman of its Assembly of Experts. Meanwhile, Qasem Soleimani, commander of the Quds Forces of the Islamic Revolutionary Guard, has also been consolidating his position, which symbolizes the growing influence of Iran’s military. “Hardline conservatives in the US and Iran form a ‘hostile symbiotic relationship,’ in which American hardliners seek to create an anti-Iranian coalition in the international community, while Iranian conservatives expand their influence through bashing the US,” said Yu Dal-seung, a professor of Farsi (Persian), Iran’s official language, at the Hankuk University of Foreign Studies. Oil prices shot up after reports that the US would be announcing a complete embargo on Iranian crude oil, with Brent Crude from the North Sea rising 3.3% to US$74.31 a barrel and West Texas Intermediate up 2.9% to US$65.87 on Apr. 22. Major disruptions expected for S. Korea’s supply chain Considering that Iranian oil accounts for about 10% of South Korea’s total crude oil imports, there are likely to be disruptions in the supply chain when the ban on Iranian oil imports takes effect on May 3. There’s expected to be a major impact on the country’s petrochemical industry, which has largely relied on Iranian condensate for its production of naphtha, flammable liquid hydrocarbon mixture commonly used to dilute heavy crude oil. Companies such as Hyundai Oilbank, Hyundai Chemical, SK Incheon Petrochemical, SK Energy, and Hanwha Total must replace Iranian condensate with an alternative supply that’s likely to be more expensive. Some of these companies have been diversifying their sources in preparation for a potential end of the sanctions waivers. By Hwang Joon-bum, Washington correspondent, and Choi Ha-yan and Park Min-hee, staff reporters Please direct comments or questions to [english@hani.co.kr]
