President Hassan Rouhani and Oil Minister Bijan Zanganeh at the opening of Phase Two of the Persian Gulf Star Refinery, Bandar Abbas, Iran, June 28, 2018

Hoping to break Iran’s economy, the US is seeking to cut Tehran’s oil exports — already halved since last April — by another 20%.

Washington, which imposed comprehensive sanctions on Iran’s energy and financial sectors on November 5, wants to reduce the exports to below 1 million barrels per day from May, according to “two sources familiar with the matter”.

Iran’s exports were about 2.5 million barrels per day last April. In anticipation of the sanctions, customers slashed their purchases to about 1.1 million barrels per day. Official sales have remained at that level since last November, as the US granted six-month sanctions waivers to eight countries, including Tehran’s largest customers China, India, Japan, and South Korea.

The sources indicated the waivers will be extended, as the Administration is concerned that pressure for a complete cut-off of Iran’s exports would trigger a spike in the global oil price.

Saudi Arabia, which worked with OPEC to increase its output to cover the reduction in Iran’s supply, announced last week that it is easing back. The Brent crude price, which has been in the mid-$50/barrel range, rose to about $67 with the news.

Washington, which imposed comprehensive sanctions on Iran's energy and financial sectors on November 5, wants to reduce the exports to below 1 million barrels per day from May Click To Tweet

“Zeroing out could prove difficult,” one of the sources said, saying $65 a barrel for Brent crude was “the high end of Trump’s crude price comfort zone”.

A source added, India, China and Turkey – the three tough cases – will continue to negotiate with the administration and are likely to keep their waivers.”

The three countries account for about 800,000 to 900,000 bpd of Iran’s exports.

The sources, who said they were briefed by the Administration, added that the screw will be slowly tightened on Iran. Waivers may be denied to smaller customers, such as Italy, Greece, and Taiwan, who have not recently bought from the Islamic Republic.

Brian Hook, the State Department’s special representative for Iran, maintained at an oil industry conference on Wednesday that the Administration is pursuing its plan to eliminate all Iranian crude exports.

However, while saying Donald Trump “has made it very clear that we need to have a campaign of maximum economic pressure”, Hook explained, “He also doesn’t want to shock oil markets.”

Oil revenues account for about one-third of the Iran Government’s budget. They also maintain the National Development for instrastructure projects, reportedly under threat from declining exports and diversion of money for the Revolutionary Guards.

Iran Daily, Feb 11: National Development Fund May Soon Be Exhausted — Parliament Report