The State Department announced that the United States would no longer provide any significant reduction exceptions (SREs) allowing the importation of limited amounts of Iranian oil.  This means that the U.S. government expects foreign countries to completely stop importing Iranian petrochemical productions. The U.S. also intends to reduce the Iranian government’s foreign currency reserve, as it allows Iran to purchase foreign medicine and alcohol for commodities.

This is a way of advancing the Trump Administration’s maximum pressure policy with regards to Iran. The Trump Administration believes that these actions will deter Iran’s malign activities in the Middle East and internationally, which may bring Iran to the negotiating table.

Impact on the Global Oil Market

The new sanctions regime on Iranian oil affects approximately one million barrels of oil per day on the international marketplace. The Trump administration expects Saudi Arabia and the UAE to increase their output into the oil markets so that prices are not significantly increased due to the lack of supply.

Turkey, China, and India will disagree with this action, as they are major importers of Iranian oil and are not aligned with the U.S. sanctions policy on Iran. It is said that the Iranian government is negotiating on next steps and speaking with Europeans countries involved in negotiation and implementation of the JCPOA, or the Iran nuclear deal.

If any person or entity is involved in the exportation of Iranian oil, they risk being designated with sanctions by the U.S. government. Foreign persons and entities understand these threats and are looking for protection from their government if something like this were to take place.

It is not yet clear whether the likes of Russia, Turkey, and China would abide entirely by the probations that the United States has set. There is talk of a conflict due to Iran’s access to the Strait of Hormuz, through which roughly one-third of the international supply travels.