The Iran Primer

Senior administration official # 1: Today marks two important milestones in our continued international effort to apply pressure on Iran to meet its international obligations with respect to its nuclear program.  We’ve obviously been building a very robust and comprehensive sanctions regime for some time now, and we took another very important step forward today in that effort. 

 

First, as of today, and as a result of the President’s determinations on March 30th -- June 11th on the availability of non-Iranian supplies of oil, any foreign financial institution based in an economy that has not been excepted from our sanctions, and knowingly conducts a significant transaction with the central bank of Iran for the sale or purchase of petroleum or petroleum products to or from Iran, is subject to U.S. sanctions…

 

Second…both China and Singapore have each significantly reduced the volume of crude oil purchases from Iran.  So as a result, China and Singapore are excepted from the NDAA sanctions for the next 180 days.  China and Singapore obviously join a list of countries that have received exceptions from the United States over the course of the last several weeks.  This decision further represents the success of our sanctions policy, and our effort to build an international coalition to reduce Iran’s oil exports, thereby applying significant pressure on Iran.

 

 

 We will continue to implement these sanctions fully to achieve additional reductions, as well as to continue to work with other oil producers to encourage increased production and development of their capacity so as to, again, maximize the impact on the Iranian government -- deny the increase in oil prices that could allow them to make up for lost revenue.

 

While we will continue to monitor closely the developments in the oil markets, including supply, demand, inventories and spare capacity, to assure that the market can continue to accommodate a reduction in purchases from Iran, we have every intention of maintaining these sanctions on the Iranian government, keeping in mind, of course, for instance, that we have the EU oil embargo that is coming fully online here, a process that will continue in the coming days, on July 1.

 

So the Iranian regime’s choice here has been to flout its international obligations, but they are paying an increasingly high price for that choice.  And with these steps today and the steps we’re prepared to take going forward, the costs are only going to rise further for Iran.  So it’s in their interest -- the Iranian interest -- to take concrete steps to address the international community’s concerns and to abide by their international obligations.  They have an opportunity to do so through the P5-plus-1 negotiations.  They have not yet done that.  But we will continue to reiterate to the Iranian government that we need to see concrete actions by them to come in line with their obligations, or else we are going to continue to ratchet up these sanctions…

 

China has made clear that it is opposed to Iran developing and possessing nuclear weapons, and it supports our dual-track approach of diplomacy and pressure as well…Just with regard to the exception today, on June 27th, an authoritative statement was published on a China energy website, and I’d draw your attention to it -- it’s www.china5e.com.  In this statement, the Chinese site indicated that there has been a structural change in China’s crude oil imports due to the downward pressure on the economy.  These changes include a 25 percent year-on-year reduction between January and May of crude oil imports from Iran to China.  The statement on this website noted that there would be a significant reduction in crude oil imports from Iran for 2012 relative to last year as well…

 

China has taken these actions for its own commercial and energy security reasons.  Still, these actions very much align with our shared global interests and allow us to move forward with the exception we’re moving forward with today, and again, it is a part of efforts that have been undertaken by the international community to send a clear message to Iran that they need to come in line with their international obligations.

Senior administration official #2:   Sanctions that the U.S. and its international partners have imposed on Iran are having a severe and growing impact…Iran’s energy sector is taking a very hard hit.  It was just pointed out by my colleague that decisions by all the major importers of Iranian crude oil to significantly reduce their purchases will mean a sharp drop in Iran’s crude oil exports.  This will cost Iran at least $8 billion in lost revenues each quarter, according to the IEA.  Reductions in Iran’s oil exports andoil revenues can be expected to increase as the oil sanctions continue to take effect.

 

Sanctions against investments and the provision of goods and services for Iran’s oil and gas developmental activities have also had a significant impact.  All major European and Japanese energy companies have pulled out of Iran’s energy sector.  Iran’s inability to gain access to capital and technology has led to a steady decline in its oil production, which is devastating in the long run for an economy so dependent on oil revenues.

 

Sanctions have also had a crippling effect on Iran’s transportation sectors.  Most European and Asian jet fuel providers have cut off supplies to Iran Air, which has provided support to Iran’s proliferation activities.  As a result, a majority of airports previously serving Iran Air now refuse to do so.  Major shipping lines such as Maersk have stopped calling on Iranian ports due to U.S. and multilateral sanctions.  Reputable providers of flagging, insurance and classification services have stopped providing such services to Iran’s main shipping line.

 

Senior administration official #3:   We have already imposed very substantial sanctions on 24 of Iran’s largest banks.  And those banks, as a result, are largely cut off from the international financial system.  In addition, due to steps that the Europeans have taken, those banks are additionally cut off globally from the SWIFT messaging system, which makes it extremely difficult for them to transact business anywhere in the world.

 

So what we’re seeing -- what we are seeing and continue to see increasingly as it moves forward is it become increasingly difficult for Iran to support the rial…Since September, the rial has lost 40 percent of its value.  It’s going to become increasingly difficult for Iran to finance its trade.

 

Back in January of this year when we designated Bank Tejerat, that was the remaining large Iranian bank that was accounting for a significant portion of Iran’s trade; with Bank Tejerat now designated and with the central bank of Iran increasingly unavailable to the Iranians to finance its trade, it’s going to become very difficult for Iran to finance its trade.  It’s going to become increasingly difficult for Iran to access its foreign reserves and to generally manage its economy.

 

And if you look at the Iranian economy compared to similar economies of other oil-exporting nations, you can see that the Iranian economy is significantly underperforming to say the least.  And I think the numbers on that speak for themselves.