US gives until May 1 to end the purchase of Iranian oil

The United States on Monday demanded that all buyers of Iranian oil stop purchases by May 1 or face sanctions, a move to choke off Tehran’s oil revenues which sent crude prices to six-month highs on fears of a potential supply crunch.

The Trump administration’s move on Monday not to renew exemptions granted last year to major buyers of Iranian oil was a more stringent outcome than some nations had expected. Several importers had hoped to continue buying Iranian oil without facing US sanctions, according to sources familiar with discussions between the United States and other nations as late as last week.

The United States reimposed sanctions in November on exports of Iranian oil after US President Donald Trump last spring unilaterally pulled out of a 2015 accord between Iran and six world powers to curb Tehran’s nuclear programme. Eight economies, including China and India, were granted waivers for six months, and several had expected those exemptions to be renewed.

Tehran remained defiant, saying it was prepared for the end of waivers, while the Revolutionary Guards repeated a threat to close the Strait of Hormuz, a major oil shipment channel in the Gulf, Iranian media reported.

The White House said it was working with top oil exporters Saudi Arabia and the United Arab Emirates to ensure the market was “adequately supplied.” Traders, already fretting about tight supplies, raised skepticism about whether this more stringent approach, along with ongoing sanctions on Venezuela’s oil industry, could backfire in the form of a major spike in prices.

Iran’s oil exports have dropped to about 1 million barrels per day (bpd) from more than 2.5 million bpd prior to the re-imposition of sanctions. 

US Secretary of State Mike Pompeo, in a briefing Monday, said “we’re going to zero across the board,” saying the United States had no plans for a grace period beyond May 1 for countries to comply.

The White House intends to deprive Iran of its lifeline of $50 billion in annual oil revenues, Pompeo said, as it pressures Tehran to curtail its nuclear programme, ballistic missile tests and support for conflicts in Syria and Yemen.

Reuters