By Arshad Mohammed, Timothy Gardner and Michael Martina
WASHINGTON (Reuters) – Iran’s unprecedented missile and drone strike on Israel is unlikely to lead to dramatic sanctions on Iranian oil exports from the Biden administration, amid concerns about raising oil prices and angering from top buyer China, analysts said.
Shortly after Tehran launched its weekend attack — in retaliation for Israel’s suspected April 1 attack on the Iranian consulate in Damascus — House Republican leaders accused President Joe Biden of failing to enforce existing measures and said they would this week would adopt a series of bills to tighten sanctions. about Iran.
Speaking to Fox News, Rep. Steve Scalise, the House Republican, said the administration has made it easier for Iran to sell its oil, generating revenue that was used to “finance terrorist activities.”
The political pressure to punish Iran creates a thorny problem for the administration: how to deter such attacks in the future without escalating regional tensions, raising oil prices or antagonizing China, the largest buyer of Iranian oil. to annoy.
Washington has said for months that one of its main objectives is to prevent the Gaza conflict between the Palestinian group Hamas and Israel from escalating into a broader regional war, with the main goal of keeping Tehran on the sidelines.
The House of Representatives on Monday overwhelmingly passed a bill called the Iran-China Energy Sanctions Act, which would expand sanctions on Iran by requiring annual reports to determine whether Chinese financial institutions have participated in transactions involving Iranian oil. It would ban U.S. financial institutions from holding accounts for Chinese entities involved in these deals.
The bill faces an uncertain future in the Senate, which is controlled by Biden’s fellow Democrats, who are wary of driving up oil prices.
Several regional analysts said they doubted Biden would take significant action to step up enforcement of existing U.S. sanctions to choke Iran’s exports of crude oil, the lifeblood of its economy.
“Even if these bills are passed, it is difficult to see the Biden administration going into overdrive, trying to act or enforce existing sanctions or new sanctions to try to curb Iranian oil exports in any meaningful way reduce or curb it,” Scott said. Modell, a former CIA officer, now CEO of Rapidan Energy Group.
ENFORCING SANCTIONS
Former President Donald Trump reimposed US sanctions on Iranian oil in 2018 after withdrawing from an international agreement on Tehran’s nuclear program. The Biden administration has tried to crack down on evasion of those measures with sanctions on companies in China, the United Arab Emirates and elsewhere.
Despite these efforts, Rapidan estimates that Iranian oil exports are 1.6 to 1.8 million barrels per day, excluding condensate, a very light oil. That’s close to the 2 million barrels per day Iran was exporting before the sanctions, Modell said.
The possible effect on gasoline prices is one reason why Biden may not take strong action to curb Iranian oil exports.
Kimberly Donovan, a sanctions and anti-money laundering expert at the Atlantic Council, said oil-related sanctions have not been strictly enforced in recent years.
“I would not expect the administration to step up enforcement in response to Iran’s missile and drone attacks on Israel this weekend, especially because of concerns that it could lead to increases in oil prices,” she said.
“The price of oil and ultimately the prices of gas at the pump become crucial during an election year.”
A State Department spokesperson said the Biden administration had not lifted any sanctions on Iran and continued to increase pressure on the Islamic Republic.
“Our comprehensive and overlapping sanctions against Iran remain in place, and we will continue to enforce them,” the spokesperson said.
THE CHINA FACTOR
Aggressively enforcing sanctions could also destabilize the U.S.-China relationship, which Chinese and American officials have been trying to repair after a difficult period after the U.S. shot down a suspected Chinese surveillance balloon flying over U.S. territory last year.
Nearly all Iranian oil entering China is branded as coming from Malaysia or other Middle Eastern countries and is transported by a “dark fleet” of older tankers that typically turn off their transponders when loading at Iranian ports to avoid detection.
Tanker tracking specialist Vortexa Analytics estimated that China acquired a record 55.6 million tonnes, or 1.11 million barrels, of Iranian crude per day last year. That amounted to about 90% of Iranian exports and 10% of Chinese oil imports.
Several analysts suggested that Washington might take some action to partially curb Iranian oil exports to temper Israel’s response to the Iranian attacks, which could escalate the conflict.
But they said this would not amount to dramatic action, such as sanctioning a major Chinese financial institution, and could instead lead to targeting Chinese or other entities engaged in such trading.
“If you really want to go after Iran’s oil exports, then yes, you should take meaningful action against China,” said a source familiar with the matter.
“Are you really going after the big banks? Are you going to do something that the administration hasn’t done and even the Trump administration hasn’t done?” he added.
Jon Alterman, a Middle East analyst at the Center for Strategic and International Studies, said there are limits to what Washington can do to impose sanctions and that evaders are adept at finding loopholes.
“I expect a gesture toward[imposing]economic consequences on Iran, but I don’t expect the White House — or any future White House — to be able to completely turn off the tap on Iranian oil. ” he said.
