The Trump administration has dropped the hammer, officially putting sanctions on Iran’s oil exports. Why, then, might Iran’s oil exports actually increase in the near future?
The U.S. granted waivers to eight countries, allowing them to continue to import oil from Iran for a six-month period. Washington spun the waivers as a brief period of time that would allow a handful of countries to get their imports from Iran down to zero. Some countries really depend on Iran, so a six-month grace period would give them a bit more leeway.
The U.S. government was a bit defensive about the action. “No one’s going to argue that Secretary Pompeo isn’t tough on Iran,” Secretary of State Mike Pompeo said on “Fox News Sunday.” “And no one is going to argue that President Trump isn’t doing the same.” He cited the loss of around 1 million barrels per day of Iranian oil exports as evidence that the policy was working. “That number will fall farther.”
Yet the President himself revealed the logic behind the waivers. “We have the toughest sanctions ever imposed but on oil we want to go a little bit slower because I don't want to drive the oil prices in the world,” President Trump told reporters on Monday. “I could get the Iran oil down to zero immediately, but it would cause a shock to the market.” It’s highly debatable that the U.S. could have succeeded in slashing Iran’s oil exports to zero, but even if it did succeed, there is little doubt that oil prices would be substantially higher than they are today.