Secretary of State Hillary Clinton said Iran will face increasing pressure from economic sanctions aimed at its disputed nuclear program.
“The pressure track is our primary focus now, and we believe that the economic sanctions are bringing Iran to the table,” Clinton said in an interview with Bloomberg Radio in Geneva on June 30. “They are going to continue to increase and cause economic difficulties for them.”
Sanctions advocates in the Obama administration and U.S. lawmakers have been weighing ways to tighten American sanctions. Proposals under discussion include expanding the restrictions to cover all Iranian financial institutions and trading companies, sanctioning money-changers and alternative payment systems, and banning trade and investment in all of Iran’s energy sector.
Three rounds of international talks since April have failed to achieve a deal to satisfy international concern that Iran is seeking the capability to build nuclear weapons. Analysts have questioned whether sanctions are effective in compelling regimes such as Iran’s to compromise, saying in some cases the economic penalties have strengthened hardline factions. Iran says its atomic program is for civilian energy and medical research.
A European Union embargo on Iranian oil imports took full effect yesterday, three days after U.S. financial sanctions on payments for Iranian oil.
Under a U.S. law enacted Dec. 31, foreign financial institutions that settle oil trades with Iran’s central bank would be cut off from the U.S. banking system. Clinton has granted exemptions from sanctions to 20 nations that imported Iranian crude, including China, India and Japan, finding they have “significantly reduced” their purchases.
EU’s Sanctions
The EU agreed in January to ban oil imports from Iran, offering a five-month phase-in period for existing contracts to let member states such as Greece find alternative supplies. An exemption on tanker insurance restrictions for the worldwide shipping industry also ran out yesterday.
Brent futures fell below $90 a barrel on June 21 for the first time in 18 months as concern that Europe’s debt crisis would spread sapped the outlook for fuel use worldwide. Now, the Iran embargo and a strike by Norwegian workers that is curbing flows from North Sea fields are stoking speculation about a rebound in prices, according to analysts such as Ole Hansen at Saxo Bank A/S.
Brent for August settlement surged 7 percent on June 29 to close at $97.80 a barrel on the ICE Futures Europe exchange.
Iran’s Exports
Iran, which depends on oil for more than half of its government revenue, is losing billions of dollars from lost oil sales, Clinton said last week. Iran’s oil exports this year have plummeted to between 1.2 million and 1.8 million barrels a day, down from 2.5 million barrels a day last year, according to the International Energy Agency in Paris.
Oil importers now could circumvent the U.S. sanctions on petroleum transactions with Iran’s central bank by finding alternate ways to settle oil trades or using financial institutions that have little or no exposure to the U.S. banking system. Discussions in the administration and Congress are aimed at tightening those loopholes.
To contact the reporter on this story: Indira A.R. Lakshmanan in Geneva at ilakshmanan@bloomberg.net
To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net
