Iran Website Says New US Sanctions Will Not Impact Petrochemical Exports

In a clear move to pressure Iran on stalled nuclear negotiations, the Biden administration on Thursday sanctioned Chinese, Emirati and Iranian companies engaged in illicit export of Iranian petrochemicals.

One of Iran’s deputy foreign ministers, Mehdi Seferi, in a state television program Thursday evening said Iran can always set up new companies to trade oil and petrochemicals.

But the United States did not mince words announcing the sanctions, after 15 months of indirect talks with Iran to revive the 2015 nuclear agreement.

“The Biden Administration has been sincere and steadfast in pursuing a path of meaningful diplomacy to achieve a mutual return to full implementation of the Joint Comprehensive Plan of Action (JCPOA). Absent a deal, we will continue to use our sanctions authorities to limit exports of petroleum, petroleum products, and petrochemical products from Iran,” a statement by Secretary of State Antony Blinken said after the Treasury Department announced the sanctions.

The move signaled the administration’s new policy toward Iran which had favored not enforcing tough sanctions imposed by former president Donald Trump while year-long talks were taking place in Vienna. But the end to formal negotiations in March left the Biden team’s strategy facing a dead end as Iran continued its nuclear program by enriching uranium at a higher level and building up more leverage.

At the same time, The Wall Street Journal disclosed on Thursday that the US has been secretly coordinating Israeli air strikes against Iranian targets in Syria since the camoaign began in 2017. Israel has been sharing its plans ahead of most airstrikes, the WSJ quoted current and former US officials.

Deputy foreign minister Seferi, however, remained defiant, saying Iran has been under various sanctions for four decades and has its own ways for self-sufficiency, exports and imports.

“Americans every day add people to their sanctions’ list, but these sanctions will not pose a hurdle to the sale of petrochemical products, and everything will continue as normal,” Seferi said.

In the real world however, it is not easy for Iran to maintain the additional level of exports it achieved since the Biden administration came to office. From a low of 250,000 barrels of crude oil sold per day in 2019, Iran’s exports reached close to a million barrels in early 2022. China has been the main customer because it knew that Washington would not enforce the sanctions while it aimed to restore the JCPOA.

Now, the US is signaling that the rules of the game have changed and pressure will be exerted on third parties buying Iran’s exports and people who are involved as middlemen.

Already, Iranian crude exports declined in May because of Russian competition, as it offers cheaper oil to China.

Iran’s income from oil products and petrochemicals was $23 billion from March 2021 to March 2022 and it aimed to boost it to $27 billion. The foreign currency generated competes with crude exports and is vital for Iran amid its current economic crisis.

Just this week, as the national currency dropped to a historic low, the government ordered petrochemical exporters to sell their dollars in the local market to bring the exchange rate down. The effort had a modest impact and for now has stabilized the Iranian rial.

“The United States is pursuing the path of meaningful diplomacy to achieve a mutual return to compliance with the Joint Comprehensive Plan of Action,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said in a statement, referring to the 2015 agreement.

But Nelson said that unless agreement was reached over the JCPOA, the US would “continue to use our sanctions to limit exports of petroleum, petroleum products, and petrochemical products from Iran.”

Thursday’s move came under Executive Order (EO)13856, part of the ‘maximum pressure’ sanctions introduced by President Donald Trump on withdrawing the US from the JCPOA in 2018. The measures gave the US government powers to sanction third-parties buying Iranian oil and petrochemicals or dealing with Tehran’s financial sector.

Blocked assets

Thursday’s statement announced “all property and interests in property of these targets that are in the United States or in the possession or control of US persons must be blocked and reported to OFAC [the US Treasury’s Office of Foreign Assets Control].” It warned that anyone engaged in “certain transactions with the individuals and entities designated today may themselves be exposed to sanctions.”

President Joe Biden came into office committed to reviving the JCPOA but has maintained ‘maximum pressure.’ While the Trump administration outlined a set of 12 demands – including Tehran ending all uranium enrichment and ending its missile defense program ­– it expected Iran to accept before these sanctions were lifted, the Biden administration took part in year-long talks in Vienna with Iran and other world powers with the aim of JCPOA revival.

With the talks paused since March, supporters and critics of the JCPOA in the US have both questioned what Biden aims to achieve, and whether he has a ‘plan B’ should agreement not be reached over reviving the 2015 agreement.

Iran has insisted that all sanctions introduced by Trump – including reportedly his designation of Iran’s Revolutionary Guards as a ‘foreign terrorist organization’ – need to be lifted if it is to return to the JCPOA, whose provisions it began infringing in 2019, the year after the US left the agreement.

‘Lax enforcement’

JCPOA opponents in the US have argued that the Biden administration has been lax in implementing third-party sanctions, allowing Tehran to maintain oil and other exports, especially to China. With the Ukraine crisis, Tehran is also benefiting from the rising oil prices even as Beijing has cut back its purchases in favor of cheaper Russian crude.

The latest US designation, the Treasury statement said, targeted companies and individuals in China and the United Arab Emirates working with Triliance Petrochemical Company and Petrochemical Commercial Company (PCC) in brokering the sale of Iranian petrochemicals “to customers in the PRC and the rest of East Asia.”

Triliance was designated under EO 13846 in January 2020, and PCC in 2018 under EO 13599, an order dating from President Barack Obama in 2012 allowing the sanctioning of companies owned by the Iranian government.

Thursday’s statement sanctioned Iran’s Marun Petrochemical, Kharg Petrochemical, and Fanavaran Petrochemical; Hong Kong-based Keen Well International, and Teamford Enterprises; and the UAE companies GX Shipping, Future Gate, Sky Zone Trading, and Youchem.

The Treasury also sanctioned two individuals Jingfeng Gao, a China-based broker, and Mohammad Shaheed Ruknooddin Bhore, an India-based Indian national, “for having materially assisted, sponsored, or provided financial, material, or technological support for, or good or services in support of, Triliance.”

The government’s Rewards for Justice program announced the award on Wednesday, saying he is involved in smuggling and other criminal operations to support the Iran-backed Lebanese group.

“Qasir is also a critical conduit for financial disbursements from Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) that are used to fund Hezbollah's activities," the statement said.

According to the US government, he also helps oversee several front companies used to mask the IRGC-QF’s role in the sale of oil and other extractives, a crucial source of income for Hezbollah, the Quds (Quds) force, the regime of Syrian President Bashar al-Assad, and other illicit actors.

“In addition, Qasir leads Hezbollah’s Unit 108, which coordinates closely with the IRGC-QF to facilitate the transfer of weapons, technology, and other support from Syria to Lebanon,” the statement said.

Earlier in the week, the US government’s Rewards for Justice program offered up to $15 million for information that can disrupt Iran’s IRGC and its Quds Force financial networks. The Quds Force is a branch of the IRGC that conducts operations beyond Iran’s borders.

The announcement can be seen as additional pressure on the Islamic Republic as it continues to support militant groups across the Middle East and beyond, after negotiations to revive the 2015 nuclear agreement known as the JCPOA came to a halt in March.

The Islamic Republic News Agency (IRNA) in an unsigned article highlighted United States sanctions against the energy industries of the three countries, although each is a different case.

In Iran’s case, sanctions were imposed for its nuclear program after former US president Donald Trump withdrew from the 2015 nuclear agreement known as the JCPOA.

In Venezuela’s case the Obama Administration and many Western countries imposed targeted sanctions against individuals for human rights abuses, corruption, and antidemocratic actions. The Trump Administration expanded economic sanctions, including on the oil industry, in response to the increasing authoritarianism of President Nicolás Maduro.

Russian oil imports have been banned by many countries after its February 24 invasion of Ukraine and many European countries are ending their natural gas imports from Russia for the same reason. However, there are no third-party sanctions on Russian energy exports, which might be the next phase of sanctions.

IRNA argued that Venezuela has the largest oil reserves in the world, mentioning 303 billion barrels, with Iran having 157 billion and Russia with 89 billion barrels of crude, totaling 45 percent of world reserves.

This represents a huge potential for influencing the world market, IRNA said, calling for cooperation between the three countries.

But facts on the ground are somewhat different than what the Iranian government seems to suggest.

Venezuela’s reserves at this moment do not count for much because it was never a large exporter. Before the US sanctions, Caracas exported around 750,000 barrels per day, a small quantity compared with Russia’s and Saudi Arabia’s daily shipments, easily reaching 15 million barrels.

Saudi Arabia alone can easily add two million barrels a day to world oil supply if it decides the move to be in its political or economic interests.

Iran’s spare production capacity is higher than Venezuela’s, but not detrimental to world supplies. In recent months, Tehran has been shipping just under one million barrels a day and if sanctions are lifted it can add a maximum of another 1.5 million barrels.

Putting Iran’s and Venezuela’s spare capacities together, they are roughly equal to what Saudi Arabia can add to world supplies in a short period of time, if it decides to do so.

Venezuela’s oil production infrastructure is in serious disrepair and Iran also admits it needs at least $160 billion in investments to revitalize production that has suffered through successive international and US sanctions.

Meanwhile, as Iran dreams about a ‘cartel’ with Russia and Venezuela, Moscow is going its separate way since the invasion of Ukraine.

Multiple reports in May and June show that Russia is selling its spare crude to China and India at the expense of Iran. A report in May said that around 40 million barrels of Iranian crude is sitting in tankers in Asian waters unable to find customers. Another report on June 13 said Tehran’s oil exports dropped by 50 percent in May, which confirmed earlier news about Russia taking market share from Iran.

Since 2020, Iran has tried to help Venezuela revive its oil and refining industries, by sending technical help and shipping gasoline and oil. Many agreements were also signed during the recent visit of President Nicolas Maduro to Iran, but any serious project needs financing, which is a challenge for both countries.

Answering a question by our correspondent Samira Gharaei at the State department briefing on Tuesday about claims by Iranian Foreign Minister Hossein Amir-Abdollahian that the Islamic Republic has proposed new initiatives aimed at reviving the nuclear deal, spokesman Ned Price implicitly confirmed the news but avoided directly commenting on Iran's proposals. 

Price reiterated that Washington and its European partners are ready to conclude an agreement in Vienna for the mutual compliance with the JCPOA, noting that for that to happen, “Tehran needs to decide to drop demands that go beyond the scope of the JCPOA”, suggesting that the new proposals by Tehran include demands extraneous to the 2015 accord. 

He confirmed that Tehran and Washington are engaged in indirect regular contact via Enrique Mora, the European Union coordinator for the Iran nuclear talks, saying, “We await a constructive response from the Iranians, a response that leaves behind issues that are extraneous to the JCPOA.” 

Earlier in the day, Iran's Atomic Energy Organization released a copy of its answers to IAEA questions about origins of uranium found at three undeclared locations, saying “sabotage” is the only explanation. 

The document that was released to the media on Tuesday was earlier submitted to the International Atomic Energy Agency, which rejected the explanations as "technically not credible".

Iran agreed March 5 to provide written explanations by March 20 of long-standing issues in its nuclear work before 2003, and to clear up remaining queries by June 21. The latest quarterly report by the UN watchdog expressed dissatisfaction with Iran’s response to agency over sites not declared as part of the nuclear program where inspectors detected traces of uranium. This led to a resolution critical of Iran’s nuclear cooperation by the agency’s board of governors on June 8. 

In its answers, Iran maintained that the only plausible explanation for such traces is probably sabotage by foreign elements at Marivan, Varamin and Turquzabad sites, pointing out that the Varamin center, near the capital Tehran, was "never" used for nuclear activities.  

Iran said the IAEA’s claims about storage of nuclear material and/or conduct of nuclear-related activities, at Varamin are not supported by valid proofs and are misleading, noting that “the initial activities conducted in this location had been exploitation of sodium sulphate from the soil and water of the surrounding region.” 

For Marivan, which is a misnomer as the site is located near the city of Abadeh in the southwestern Fars province, Iran said the origin of the particles is "unknown" and insists the site was used for "the exploitation of fireclay through a contract with a foreign company decades ago" hence the IAEA’s “conclusion is absolutely false, unrealistic and biased.”

Iran claims it carried out its own investigation in Turquzabad and "did not find the origin of the particles" reported by the IAEA. 

Later on Tuesday, the head of the Atomic Energy Agency of Iran, Mohammad Eslami, said that Iran’s contacts with the International Atomic Energy Agency are still underway, reiterating that Iran will act based on the safeguards protocol. 

The resolution called on Iran to engage with the IAEA, the United Nations nuclear watchdog, without delay and expressed “profound concern” at Iran’s failure to satisfy the agency over the traces of uranium.

Following the resolution, Iran retaliated, telling the IAEA it plans to remove more monitoring equipment, but intends to maintain a basic level of monitoring and inspectors’ access as required under the Nuclear Non-Proliferation Treaty (NPT). 

The resolution comes with year-long talks paused since March between Iran and five world powers aimed at reviving the 2015 Iran nuclear deal, the JCPOA (Joint Comprehensive Plan of Action).