What Happened
A top official with the U.S. State Department warned April 2 that the White House was not planning to issue new waivers — which allow certain countries to purchase Iranian oil without coming under U.S. sanctions — once the current round expires May 5. According to an April 1 Reuters report, an official within U.S. President Donald Trump's administration also allegedly said that the United States was also considering imposing new secondary sanctions in May that would target additional areas of the Iranian economy, without providing further detail as to which.
Meanwhile, the United Nations released a letter April 3 that the United Kingdom, France and Germany had written to the U.N. secretary-general criticizing Iran's recent attempt to launch a satellite into orbit via its Simorgh launch vehicle. In the letter, the European powers alleged that because the Simorgh vehicle shared some technologies with ballistic missiles, the launch violated U.N. Security Council Resolution 2231, which bans Iran from engaging in "any activity related to ballistic missiles designed to be capable of delivering nuclear weapons, including launches using such ballistic missile technology."
Why It Matters
The strong words shared by the United Kingdom, France and Germany in the U.N. letter could prompt the European Union to consider additional sanctions related to Iran's ballistic missile program. Unlike the United States, however, the primary EU security concern with Iran remains nuclear proliferation in the Middle East. Brussels will thus continue to reserve its most powerful sanctions to deter activity related to Iran's nuclear program. This means that any new EU sanctions related to Tehran's ballistic missile program would be limited to asset and travel freezes — and so not include the kind of broader sanctions that would cut off Europe's economic ties with Iran as the United States has pushed for.
U.S. threats to impose new sanctions against other business sectors in Iran, however, have the potential to be a much bigger blow to Tehran's economy. Secondary sanctions imposed by the United States — which are sanctions that target non-U.S. companies to try to prevent them from trading with Iran — currently impact Tehran's energy sector, among several other sectors. The Trump administration's desire to expand the scope of secondary sanctions could include a broader set of industrial sectors, such as the aviation, automotive and electronics sectors. Such sanctions could hurt Iran's domestic industrial base, which would be felt most acutely by the country's politically powerful middle- and upper-middle classes.
The U.S. desire to reduce Iran's oil exports to zero by letting its waivers expire in May, on the other hand, will be far more difficult to accomplish. Of the eight countries with U.S. waivers, only three have so far completely cut off their imports of Iranian oil. And it's unlikely that the others — namely, China, India and Turkey — will be able to significantly reduce their consumption any time soon. The price of oil has also risen in recent weeks, and any moves to completely cut Iran's oil exports from the market risk increasing prices even more. As a result, despite the recent statement from the U.S. State Department official, Washington will likely end up keeping some level of waivers to avoid spooking the market, at least in the short term.
