Serious outcomes await oil market after new US bans on Iran: Deputy FM

Iran’s Deputy Foreign Minister Abbas Araqchi has warned of the “serious effects” of upcoming US sanctions against Iran on oil prices and the entire Middle East.

“I am not an expert on this. But I think it is obvious and everybody is predicting that if Iran is out of the market it would have serious effects on the market, including on oil prices,” Araqchi said in an interview with Russia’s Sputnik news agency.

US President Donald Trump announced in May that Washington was pulling out of the nuclear agreement, officially known as the Joint Comprehensive Plan of Action (JCPOA), which lifted nuclear-related sanctions against Tehran in exchange for restrictions on Tehran’s nuclear program.

The deal had been signed between Iran and the five permanent members of the UN Security Council — the United States, Britain, France, Russia and China — plus Germany in 2015.

The US administration reintroduced the previous sanctions while imposing new ones on the Islamic Republic. It also introduced punitive measures — known as secondary sanctions — against third countries doing business with Iran.

A first round of American sanctions took effect in August, targeting Iran’s access to the US dollar, metals trading, coal, industrial software, and auto sector. A second round, forthcoming on November 4, will be targeting Iran’s oil sales and its Central Bank.

In response to a question about the likelihood of Iran’s closure of the Strait of Hormuz in case of Iran deprived of oil sales, as reiterated by the Islamic Revolutionary Guards Corps (IRGC), Araqchi said it was “not a threat” but “a reality.”

“Obviously, all countries in the Persian Gulf region want to sell their oil, and the world is in need of this region’s oil and other energy resources,” the top Iranian diplomat added.

He emphasized that any arrangement for the sale of oil in the region “should be inclusive” and added, “If you exclude one country [and] make sure that one country’s oil sale comes to zero, as President Trump wants, that would create problems for the whole region. This is an obvious fact.”

IRGC Commander Major General Mohammad Ali Jafari said in July that it stands ready to put in action Iranian President Hassan Rouhani’s latest position that if Tehran were not able to export its crude oil through the Strait of Hormuz, no other country would be able to do so.

The IRGC commander’s remarks came after President Rouhani delivered a stern warning to the US during his European tour against any attempt to block Iranian oil exports in the light of Washington’s withdrawal from the JCPOA.

Speaking at a joint press conference with his Swiss counterpart, Alain Berset, in the Swiss capital, Bern, Rouhani lashed out at American officials for threatening to stop Iran’s oil exports and said they would never be able to carry out such a threat.

The Iranian president added that it is “incorrect and unwise” to think that “one day all oil producing countries would export their surplus oil and Iran would be the only country that cannot export its oil.”

US President Donald Trump’s National Security Adviser John Bolton said in August that the United States is exerting “maximum pressure” on the government of Iran to change its behavior, adding that Washington is prepared to use sanctions to drive Iranian oil exports down to zero.

Iran considers SWIFT payment to bypass US sanctions

Elsewhere in his interview, Araqchi said Iran is not ruling out the possibility of establishing an alternative to the international payments provider SWIFT to circumvent US sanctions.

“As we know Europeans are also working on SWIFT to see how SWIFT can continue working with Iran, or if a parallel [financial] messaging system is necessary or not … It could go either way — either SWIFT can continue working with Iran, or a parallel messaging system could be established for Iran. This is something that we are still working on,” the senior Iranian official said.

France and Germany announced in August that they are seeking to develop an independent European financing mechanism with the aim of sidestepping US sanctions against countries, including Iran, and asserting the continent’s “sovereignty.”

French Finance Minister Bruno Le Maire said Paris and Berlin are making joint efforts to develop either a European or a Franco-German financing system.

Echoing Le Maire’s stance, German Foreign Minister Heiko Maas said work had already begun on creating a European payment system independent of the SWIFT global payment network.

The German foreign minister said in August 21 that European countries need to adopt payment systems independent of the United States if they seek to keep the historic Iran nuclear deal.

On September 24, Iran and its five partners released a joint statement announcing the setting up of a “Special Purpose Vehicle” to facilitate continued trade with Iran, bypass the US’s financial system, and avoid any impact of America’s secondary sanctions.