The U.S. gave a stark warning to companies around the world: Evading sanctions on Iran will hurt.
“I promise you that doing business in Iran in defiance of our sanctions will ultimately be a much more painful business decision than pulling out of Iran,” Secretary of State Michael Pompeo said Monday at a news conference in Washington, after the U.S. imposed penalties on 700 individuals, banks, ships, aircraft and companies tied to Iran’s energy and financial industries.
Vowing “swift, severe penalties” to those caught violating sanctions, Pompeo said the U.S. pressure’s campaign has cost Iran $2.5 billion in oil revenue since May. But oil traded close to a six-month low as Pompeo’s tough talk was softened by his announcement of temporary waivers from penalties for eight governments.
Facing criticism from some U.S. conservatives who didn’t think he should issue any waivers, President Donald Trump said Monday that he didn’t want to shock energy markets by forcing all buyers to halt Iranian oil purchases.
“We want to go a little bit slower because I don’t want to drive the oil prices in the world up,” Trump told reporters Monday in Washington. “It would cause a shock to the market.”
Trump is trying to force Iran to give up its nuclear ambitions and what he calls its support for terrorism in the Middle East by choking off its oil revenue. The move came after he abandoned the deal that the U.S. and five other world powers reached in 2015 to ease sanctions in return for curbs on Iran’s nuclear program.
Pompeo confirmed that the eight governments granted waivers from oil sanctions are China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey. He said the waivers were only temporary measures to ease their transition from Iranian crude and avoid destabilizing the energy market. But some Republicans in Congress have vowed legislation to eliminate the waivers, and Iran’s President Hassan Rouhani ridiculed them on Monday.
“That the U.S. is forced to exempt eight nations from sanctions on oil sales when it had previously said it wants to cut Iran’s oil sales to zero, isn’t that a sign of Iran’s victory and the U.S. backing off?” Rouhani said.
Pompeo said more than 100 companies have already withdrawn from the Iranian market since May, and the U.S. has shown in the past its willingness to heavily fine violators of American sanctions. French bank BNP Paribas SA agreed to pay $8.9 billion in July 2014 for violating U.S. sanctions against Sudan, Cuba and Iran. Germany’s Commerzbank AG agreed to pay $1.45 billion for moving funds through the U.S. financial system for Sudan and Iran.
The waivers announced Monday largely confirmed expectations in the energy market and eased concerns about the prospects of a tight global market at the end of the year. West Texas Intermediate crude for December delivery dropped as much as 1 percent to $62.52 a barrel on the New York Mercantile Exchange, the lowest since April 9, before recovering 0.6 percent to $63.52 as of 1:51 p.m. London time.
The administration’s pledges to be “aggressive” in enforcement of the sanctions indicates that U.S. individuals and companies in violation could face high penalties or even the threat of jail time, according to John Smith, who left Treasury in May as a civil servant leading the unit that issues and enforces sanctions and is now a partner at the law firm Morrison & Foerster.
Treasury Secretary Steven Mnuchin added 700 entities to the sanctions list on Monday, bringing it to 900. Among those listed for the first time Monday were 50 Iranian banks, 200 individuals, and shipping vessels tied to Iran’s shipping and energy sector and more than 65 Iranian aircraft. The only path to sanctions relief is for Iran’s leaders to halt its support for terrorism and abandon its nuclear ambitions “immediately,” Mnuchin said, adding that the U.S. is watching the Iranian regime with “laser focus.”
Exceptions to sanctions will be made for humanitarian purchases, such as for food and medicine, though the statements on Monday didn’t indicate how those would be determined or approved.
The administration had signaled that its enforcement of sanctions would include targeting Swift, the global financial messaging network, for any violations of the new restrictions.
In a statement Monday, Swift said it would suspend “certain Iranian banks’ access” to its system.
“This step, while regrettable, has been taken in the interest of the stability and integrity of the wider global financial system,” according to the statement. “Our mission remains to be a global neutral messaging provider.”
On Friday, Trump said he is open to a deal with Iran that blocks its nuclear-weapons program and that his so-called maximum pressure campaign targets Iran’s government, not its people. But more sanctions will come until Iran’s government decides to “either abandon its destructive behavior or continue down the path toward economic disaster,” the president said.
But Rouhani said his country would engage in talks only if the U.S. honored its commitments in the Iran deal.
“Respect your commitments, then we will talk,” Rouhani said in a meeting with economy officials, according to state-run Islamic Republic News Agency. “We have no issues with talks if the opposing side is a party that values its word, promise and pact.”