(Bloomberg) -- The U.S. has placed new sanctions on Iran and a top American official has said more measures will follow, further restricting the Islamic Republic's ability to export oil. Iran is exporting a fraction of the crude it previously shipped because of sanctions and the U.S. may look to tighten the flow of other oil products next.
The U.S. Treasury Department imposed new restrictions on a shipping network controlled by Iran's Islamic Revolutionary Guard Corps on Wednesday. “There will be more sanctions coming,” Brian Hook, the U.S. special envoy for Iran, said at the State Department soon after the announcement.
A proposal led by French Finance Minister Bruno Le Maire for pre-payments of Iranian oil could offer a lifeline, but President Donald Trump's administration would need to grant waivers for the $15 billion credit line to go into effect. The U.S. is widely expected to thwart the plans, even though Trump last month said he'd support plans for a letter of credit to Iran secured by oil.
“Yesterday was about signaling – not least to the French – that the U.S. administration is fully committed to its maximum pressure campaign on Iran,” said Richard Mallinson, a geopolitical analyst at consultant Energy Aspects Ltd. in London, on Thursday. “Hook was clear in saying ‘we won't facilitate this and we're not changing our requirements on Iran'.”
The U.S. has not specified the activities it will target in its next round of sanctions but refined products are a likely focus, said Mallinson. Iranian oil products such as liquefied petroleum gas and naphtha are covered by U.S. sanctions but Iran has continued to ship large volumes to international buyers.
Enforcing sanctions on oil products is more difficult than crude and the U.S. would need to allocate more resources to curb the flow of oil products out of Iran, said Mallinson. The U.S.'s proactive approach to sanctions enforcement, including direct communication with ships it suspects of breaching its measures, makes such a move more likely, he said.
Hook sent emails to the captain of the Adrian Darya 1, previously known as Grace 1, offering money in return for helping the U.S. seize the vessel. The contents of Hook's email were first reported by the Financial Times and confirmed by two senior administration officials who asked not to be identified discussing private communications.
But while the U.S. is ratcheting up pressure on Iran's oil exports now, a meeting between Trump and Iranian President Hassan Rouhani holds the potential for relations to thaw. The U.S. has proposed a meeting between the two leaders on the margins of the UN General Assembly in New York later this month, Japan's Kyodo News reports, citing an unidentified U.S. government official.
“Trump's willingness to meet Rouhani shows desire for a resolution, which is ultimately bearish for oil markets,” said Bill Farren-Price, a director at consultant RS Energy Group Inc. “We see exports more likely to recover from here as sanctions fray, or as the two sides move toward a deal of some sort.”
--With assistance from Anthony DiPaola, Saleha Mohsin and Nick Wadhams.
To contact the reporter on this story: Verity Ratcliffe in Dubai at vratcliffe1@bloomberg.net
To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Helen Robertson
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