US allies lament Trump's decision to pull out of Iran deal

14 May, 2018, 04:16 | Author: Regina Lloyd
  • US oil prices climbed above $70 per barrel on Monday for the first time since November 2014. Sergei Karpukhin  Reuters

Nonetheless, the Europeans were taken aback by the expansiveness of Trump's effort to tear up the JCPOA by fully reinstating all previously existing sanctions against Iran, and showing no regard for companies that concluded business deals in Iran on the belief that the JCPOA was accepted worldwide policy, endorsed and affirmed by the United Nations Security Council.

Earlier this month, the International Atomic Energy Agency (IAEA) released a statement saying that according to its December 2015 Board of Governors report, "the agency had no credible indication of activities in Iran relevant to the development of a nuclear explosive device after 2009".

Since the sanctions were lifted in 2016, major European companies, partly wary of the remaining USA sanctions on Iran, have been reluctant to do business with Tehran, which needs to attract over $100 billion in foreign investment to boost its crude output. "Iranian is not the only crude".

USA pressure to decrease Iranian oil purchases puts South Korea in an especially tricky position while it is trying to convey to North Korea that it is serious about committing to a denuclearization deal. Alongside China, France, Russia, the United Kingdom, and Germany, the United States wanted Iran to halt their nuclear weapons program.

Market participants said there were still many unanswered questions about how the United States might impact European companies. And if South Korea does not find some sort of common ground with the United States, it risks exacerbating a point of friction between two partners that can not afford to be out of lockstep in the messages - both explicit and implicit - being sent in a critical period to Pyongyang. Pulling out of this deal has sent oil prices soaring, which rewards Iran and its equally petro-dependent ally, Russia. Last time round, China and the other signatories were part of an worldwide consensus that aimed to force Iran to accept restrictions on its nuclear program even if they at times circumvented the sanctions.

Concerns about the potential impact from United States imposing fresh sanctions on Iran - the third largest producer of crude globally - is among the major factors driving up crude prices.

Still, Tokyo will likely work diligently to cut its imports in the coming months.

Under the terms of the JCPOA, Iran is now in a position to accuse the US of violating the agreement.




"There are worries that Iran's oil exports could fall by about one million barrels per day (bpd) from current levels", said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. Those EU efforts ultimately yielded a political agreement with Washington that effectively shielded European companies from enforcement action by the U.S.

Perhaps the most interesting reason for the relative calm since Trump's announcement may be that the market has finally grown confident about USA oil production from shale and the likelihood that higher global oil prices will prompt greater domestic production relatively quickly. US heating oil futures surged to $2.2258 a gallon, the highest since February 2015.

India is the third largest supplier of crude oil to India after Saudi Arabia and Iraq.

The Competition, EU and Trade team of Taylor Wessing has a broad range of experience in representing companies with regard to sanctions against Iran. A majority goes to Asia, with Europe receiving about 600,000 bpd. But Europe is unlikely to do so.

It took almost three years to happen, but oil prices finally did it. Saudi Arabia will “mitigate the effects of any supply shortages, ” it said.

The U.S. sanctions have a 180-day period during which buyers should "wind down" oil purchases, meaning any loss of supply will not be immediately felt - and companies don't have to rush to find alternatives.

The U.S. withdrawal from the Iran nuclear deal means Boeing's licenses to sell billions of dollars in commercial jetliners to Iran will be revoked, Treasury Secretary Steven Mnuchin said Tuesday. Washington can not ensure success alone, particularly because it can not offer sufficient heavy oil exports to compensate for the loss of Iranian heavy oil barrels from the market.

Boeing said it would consult with the government on what comes next. Increasing supply by too much, or without coordination with fellow producers such as Russian Federation, could inundate markets and drive prices lower.

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