U.S. President Donald Trump has decided not to reissue waivers in May allowing importers to buy Iranian oil without facing U.S. sanctions, the White House said in a statement on Monday.
The United States, Saudi Arabia and the United Arab Emirates "have agreed to take timely action to assure that global demand is met as all Iranian oil is removed from the market," the White House said. The United States announced on Monday that all buyers of Iranian oil will have to end their imports shortly or face sanctions, a source familiar with the situation told Reuters, triggering about a 3 percent rise in crude prices.
In addition, Trump said that Saudi Arabia and other OPEC nations could "more than make up" for any drop in Iranian oil supplies to global markets.
"Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil," Trump said on Twitter.
Saudi Arabia's foreign minister on Tuesday welcomed the decision, saying it was a necessary step to halt Tehran's "destabilizing" policy in the region.
"Saudi Arabia fully supports this step taken by the United States as it is necessary to force the Iranian regime to end its policy of destabilizing stability and its support and sponsorship of terrorism around the world," Ibrahim al-Assaf said in comments carried on state media.
He reiterated a statement issued by the kingdom's energy minister on Monday that the world's largest oil exporter would coordinate with other oil producers to ensure an adequate crude supply and balanced markets after Washington's announcement.
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Prime Minister Benjamin Netanyahu commended Trump for the move: "President Trump's decision is one of great importance in the efforts to increase pressure on the Iranian terror regime. We stand beside the U.S.'s determination against Iranian agression and this is the right way to stop it."
Israel's acting Foreign Minister Yisrael Katz also welcomed Trump's decision, saying: "Only harsh steps will force the Iranian regime to completely halt its dangerous nuclear program and its support for Hezbollah and the other terror organizations in the region. Israel will continue being a loyal ally of the United States in the battle against Iran's aggression."
Turkey slammed the move, saying it would not serve regional peace and stability.
"We do not accept unilateral sanctions and impositions on how we build our relationship with our neighbors," Foreign Minister Mevlut Cavusoglu said on Twitter.
Global benchmark Brent crude oil futures rose by as much as 3.2 percent to $74.30 a barrel, the highest since Nov. 1, in early Asian trading on Monday in reaction to expectations of tightening supply. U.S. West Texas Intermediate futures climbed as much as 2.9 percent to $65.87 a barrel, its highest since October 30.
U.S. President Donald Trump has been clear to his national security team over the last few weeks that he wants the waivers to end, and National Security Adviser John Bolton has been working the issue within the administration.
In November, the U.S. re-imposed sanctions on exports of Iranian oil after President Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers.
Washington, however, granted Iran's eight main buyers of oil waivers to the sanctions that allowed them limited purchases for six months.
They were China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece.
But on Monday, Secretary of State Mike Pompeo will announce "that, as of May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate," the Post's columnist Josh Rogin said in his report, citing two State Department officials that he did not name.
On April 17, Frank Fannon, U.S. Assistant Secretary of State for Energy Resources, repeated the administration's position that "our goal is to get to zero Iranian exports as quickly as possible."
Asia hit hardest
An end to the exemptions would hit Asian buyers the hardest. Iran's biggest oil customers are China and India, who have both been lobbying for extensions to sanction waivers.
South Korea, a close U.S. ally, is a major buyer of Iranian condensate, an ultra-light form of crude oil which its refining industry relies on to produce petrochemicals.
Last Tuesday, Turkish presidential spokesman Ibrahim Kalin said that Turkey expects the United States to extend a waiver granted to Ankara to continue oil purchases from Iran without violating U.S. sanctions.
Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore, said the end to sanction waivers "could leave regional (Asian) heavyweights scrambling to find alternative supplies in the near term in what is already a very tight structural supply situation globally."
Washington has a campaign of "maximum economic pressure" on Iran and through sanctions, it eventually aims to halt Iranian oil exports and thereby choke Tehran's main source of revenue.
So far in April, Iranian exports were averaging below 1 million barrels per day (bpd), according to Refinitiv Eikon data and two other companies that track exports and declined to be identified.
That is lower than the at least 1.1 million bpd estimated for March, and down from the more than 2.5 million bpd before sanctions were re-imposed last May.