Sweeping US sanctions target Iran’s oil, banks

Toughest of Obama-era sanctions lifted under 2015 nuclear deal will come back on Monday, six months after US President Donald Trump bolted from nuclear deal.

WASHINGTON - The United States will add 700 individuals and entities to its Iran blacklist and pressure the global SWIFT banking network to cut off Tehran when expanded sanctions are put in place next week, US officials said Friday.

But eight countries will be able to continue importing Iranian oil at lower levels in order to avoid upsetting global crude markets when the sanctions take effect on Monday, they said.

The US aims to cripple the Iranian economy to pressure Tehran to halt its nuclear activities and what the US says is broad support for "terrorism" in the region, Secretary of State Mike Pompeo said.

The reimposition of sanctions "is aimed at depriving the regime of the revenues it uses to spread death and destruction around the world," Pompeo said.

"Our ultimate aim is to compel Iran to permanently abandon its well-documented outlaw activities and behave as a normal country."

The sanctions come six months after President Donald Trump withdrew from the 2015 nuclear deal struck between world powers and Iran.

At the time, he began reimposing sanctions that had been suspended or removed by his predecessor Barack Obama. That process will be completed starting from midnight Sunday, US eastern time, when sanctions on the regime's banks, shippers, shipbuilders and oil sector are imposed.

The impact remains in question as other countries, particularly Washington's European allies, resist joining its effort to economically strangle the Tehran regime.

The European Union has gone so far as to protect businesses that operate in Iran. It has announced plans for a legal framework through which firms can skirt US sanctions, although few major corporations have been eager to risk the wrath of penalties in the world's largest economy.

"This is not 2012 when the world was united behind sanctions against Iran. This is the Trump administration trying to force the rest of the world to go along with a policy that most countries do not accept," said Barbara Slavin, an Iran expert at the Washington-based Atlantic Council.

"The US has had some success in terms of frightening away major corporations. The sanctions hurt a lot. But Iran is still going to be able to sell oil," especially to China, she said.

Oil trade exemptions

Pompeo said the US will grant exemptions to eight countries that have pledged to or have already cut back on purchases of petroleum from Iran, which has long depended on crude exports to power its economy.

He did not name the eight countries, but they are believed to include India, Japan, South Korea, and possibly China.

Pompeo said the countries agreed that the payments for the oil will go into offshore accounts that Iran will only be able to tap for "humanitarian trade, or bilateral trade in non-sanctioned goods and services."

"Maximum pressure means maximum pressure," Pompeo said.

To punish Iranian banks, US Treasury Secretary Steve Mnuchin said the global financial network SWIFT -- which enables secure bank-to-bank communications and transactions -- will also be subject to US sanctions if it provides services to Iranian financial institutions on the US blacklist, which includes most major Iranian banks.

That could make it very hard for Iran to do business with other countries.

"SWIFT is no different than any other entity," Mnuchin said.

US objective in question

Justifying the action, Pompeo has issued a list of demands for Iran that go well beyond the nuclear program that was the focus of Obama's deal.

He wants the Shiite clerical regime to withdraw from war-ravaged Syria, where it is a critical ally of President Bashar al-Assad, and to end longstanding support to regional militant movements Hezbollah and Hamas.

The US also wants Iran to stop backing Yemen's Huthi rebels, who are facing a US-supported air campaign led by Saudi Arabia.

But experts don't expect Iran's leaders to immediately throw in the towel.

"It's basically magical thinking. The Iranians have been able to continue their support to regional proxies and allies for 40 years despite economic pressure," said Ali Vaez of the International Crisis Group.

He said the Trump administration believed that a constrained, struggling Iran would see its influence erode. But the final goal, he said, was unclear.

"I think the end-game depends on who you're asking. The president himself is interested in having a broader, better deal with the Iranians, but I believe that most of his national security team are interested in either destabilizing Iran or assuring a regime change in Tehran," Vaez said.

Sanctions already reimposed

On August 7, the first sanctions lifted under the 2015 nuclear deal came into force, banning:

- The Iranian government's purchases of dollars, or the international buying and selling of significant sums of rials, Iran's under-pressure currency

- Purchases of Iranian treasury bonds

- Trade in gold or other precious metals, aluminum, steel, carbon or graphite

- Automobile and commercial aviation trade

- US imports of Iranian carpets or foodstuffs

Sanctions come into force Monday

The toughest of the Obama-era sanctions lifted under the 2015 nuclear deal will come back, including bans on:

- Energy sector sales including oil. The Trump administration says it aims for Iranian oil exports to be "as close to zero as possible" but the United States will likely give at least temporary reprieves to countries that cut but do not end purchases.

Iran will likely still export oil, its main commodity, in some form. Iran could mix its oil with crude from neighbouring Iraq, sell on the black market or try a barter system supported by the Europeans.

Another key pressure point will be the price of oil, which is politically sensitive in the United States. The reduction in Iranian crude would likely bring up global prices. Saudi Arabia could make up the difference; while the kingdom has threatened to use oil in retaliation for international punishment over its killing of journalist Jamal Khashoggi, it also is eager to squeeze Iran, its regional rival.

- Financial transactions. Starting on Monday, any foreign institution that does business with Iran's central bank or other banks in the country will lose access to the US financial system. The risks for foreign banks are high in a globalized economy in which the dollar remains the dominant currency.

US hardliners want to press ahead on disconnecting Iranian banks from SWIFT, but others argue for keeping the option as a bargaining card with the Europeans and say that SWIFT access remains useful in tracking Iranian transactions.