U.S. Warns Iranian Oil Tankers May Be Courting 'Environmental Disaster'

Secretary Jeremy Hunt

The Trump administration pushed governments to reduce Iranian oil imports to zero with related sanctions.

In Moscow's first official reaction since the restoration of Washington's bans on Tehran, Russian Foreign Minister Sergei Lavrov said on Tuesday that the U.S. sanctions are "not legitimate".

Brian Hook, special US representative for Iran, said that as major insurers withdraw coverage for Iranian vessels, Iran will likely turn to domestic insurance companies that will be unable to cover losses for major maritime accidents.

Lavrov emphasized that Russian Federation and its European partners were looking for ways to maintain economic ties with Iran.

The US has warned ports and insurance companies to avoid dealing with Iranian ships, as new sanctions are slapped on Tehran by Washington.

The sanctions, however, threatened India's ability to obtain financing for the development of Chabahar, which could potentially open the way for millions of dollars of trade for land-locked Afghanistan and end its dependence on Pakistan's port of Karachi. Moreover, Trump's sanctions against Iran's financial sector essentially make 30 banks and their subsidiaries off-limits to foreign lenders, undermining its means to facilitate trade. This price structure, known as contango, materializes when market players believe there is a supply glut and decide to store oil rather than sell it.

Preventing oil prices from rising any further has been a relentless rise in United States crude output, which hit a record 11.6 million bpd in the week ending November 2, according to Energy Information Administration (EIA) data released on Wednesday.

The sanctions exception granted to the Chabahar project aims to further USA ties with Afghanistan and India "as we execute a policy of maximum pressure to change the Iranian regime's destabilizing policies in the region and beyond", the State Department spokesman said. The oil import bill for the current financial year, 2018-19, is expected to rise to $125 billion, i.e., by 42 per cent.

Some market watchers believe the Organization of the Petroleum Exporting Countries and allies including Russian Federation may take steps to reduce supply. "The US has given waiver to some countries including India".

Prices sank amid fears that the oil market is oversupplied compared to demand and have fallen steadily since the US government eased sanctions on Iranian oil in October.

Iran emerged in early 2016 from years of global sanctions under a deal with world powers that curbed its disputed nuclear programme. First of all, unlike the earlier UN sanctions, it has been unilaterally imposed by the United States. Even its allies UK, France and Germany, who were co-signatories to the JCPOA, have refused to accept the sanctions. The other two signatories - Russian Federation and China - are firmly opposed to the sanctions. While ordinary Iranians struggled, Iran's clerical and security establishment and business world sought kept the economy running by means including resorting to barter as well as foreign currencies other than the United States dollar.

The sanctions, however, will inevitably erode Iran's state finances and raise already high inflation and jobless rates, making life harder for ordinary Iranians.

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