Obama moves to choke Iran oil exports

President Barack Obama gave the go-ahead for robust sanctions against Iran’s energy sector Friday, judging there is enough oil on world markets to ensure the move will not hammer US consumers. With just hours to go before a deadline to decide, Obama determined the United States could punish banks and other financial institutions for buying oil from Iran, without causing a global oil shock.

The step could have major implications for Tehran and its customers, forcing firms and countries to choose between trade with the United States and Iranian oil. China, South Korea, India, Japan and the European Union are major buyers of crude from Tehran.

The measures call on countries to “significantly reduce” oil imports from Iran—although not stop them all together—or face being frozen out of the US financial system. Many countries have spent months scrambling to reduce dependence on Iranian oil before the sanctions go into effect in June.

Senior US officials said Japan and the European Union had done enough to dodge sanctions, but exemptions for India, South Korea, China and nine other nations were still being weighed. “We have been very transparent with countries around the world about the steps they can take to pursue that type of exception,” one official said.

Japan earlier vowed to reduce its Iran oil imports “considerably,” while the EU is set to introduce its own partial embargo on Iranian oil this summer. Shortly before Obama’s announcement, Turkey’s national oil company Tupras said it had cut purchases of Iranian oil by 20 per cent.

But China has yet to show its hand publicly and India, despite friendly relations with the United States, has so far defied pressure to shut off oil from Iran. Oil and gas revenues form the backbone of Iran’s economy and have proven vital to the survival of a regime that has been in power since the 1979 Islamic revolution.

The energy industry accounts for 70 per cent of government revenues. The prospect of more tensions between Iran and the West has caused rumbling in oil markets for weeks, but some traders took solace from Obama’s assessment. The sanctions will go into effect on June 28.

Obama had to make a decision on the sanctions 90 days before their entry into force and will reassess the move periodically.

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