President Obama on Friday signed off on tough new sanctions aimed at hitting Iran’s oil exports, after determining there is enough crude supplies in the world market that taking the step won’t harm U.S. allies or drive gas prices even higher.
The president’s move gives him the ability to impose sanctions on foreign banks that continue to conduct business from Iran’s central bank, cutting them off from the financial systems of the U.S. and its allies. The U.S. and European Union have issued a string of sanctions against Iran to isolate it from the world economy and pressure Tehran to stop developing its disputed nuclear program.
Countries involved in purchasing oil from Iran can still prevent the sanctions if they significantly curtail their imports before the June 28 deadline.
Speculation about an Israeli attack on Iran’s nuclear facilities has helped push up oil and gas prices, which have become one of the biggest political problems for Mr. Obama’s re-election.
In clearing the way for the congressionally mandated sanctions, Mr. Obama said he made his decision after “carefully considering” a Feb. 29 Energy Information Agency report to Congress that analyzed the world’s oil supply and the impact the sanctions would have. The penalties are timed to take effect at the end of June, around the same time Europe’s embargo on Iranian oil also begins.
In a presidential memo, Mr. Obama said he determined “that there is a sufficient supply of petroleum products from countries other than Iran to permit a significant reduction in the volume of petroleum and petroleum products purchased from Iran by or through foreign financial institutions.” He also promised to monitor the situation closely to assure that the market can continue to accommodate a reduction in purchases of oil and oil products from Iran.
A White House spokesman said Mr. Obama gave the oil sanctions a green light despite a worldwide oil market that has become increasingly tight over the first two months of 2012 because of a series of production disruptions in South Sudan, Syria, Yemen Nigeria and the North Sea, as well as international concern over Iran’s nuclear activities and recent steps taken to reduce the amount of Iranian crude oil products worldwide.
“Nonetheless, there currently appears to be sufficient supply of non-Iranian oil to permit foreign countries to significantly reduce their import of Iranian oil, taking into account current estimates of demand, increased production by some countries, private inventories of crude oil and petroleum products, and available strategic petroleum reserves and, in fact, many purchasers of Iranian crude oil have already reduced their purchases or announced they are in productive discussions with alternative suppliers,” the spokesman said in a release.
In coming to a decision on the sanctions, Mr. Obama had to navigate some tricky political and foreign policy concerns. Many of the countries that purchase Iranian oil are U.S. allies, including several European countries, India, Japan and South Korea. The sanctions bill, passed as part of a sweeping defense authorization bill in December, allows the U.S. some flexibility to grant waivers to countries who agree to significantly cut down their Iranian oil imports.
The State Department has already announced 10 waivers to European Union countries and Japan because of their agreements to reduce their purchases of Iranian oil.