Europe and the United States are ready to increase sanctions on Iran, and oil will become a target?

Reporter | Anjing

Editor|Liu Haichuan

The United States and the European Union are poised to expand sanctions on Iran while Israel has yet to decide how to counter Iran's retaliatory attacks, punishing Iran while trying to persuade Israel to abandon its military retaliation.

Iran is already one of the world's most sanctioned countries, and the United States has limited new sanctions, but the U.S. Treasury Department is considering further crackdowns on Iranian oil exports. Some EU members have proposed direct sanctions against Iran's Islamic Revolutionary Guard Corps, causing controversy within the EU. The Group of Seven (G7) countries are also ready to join the sanctions.

Israel's wartime cabinet met for the third time in three days to discuss a plan to counter Iran. British Foreign Secretary David Cameron and German Foreign Minister Annalena Baerbock have travelled to Israel to mediate.

On April 16, 2024 local time, the official website of the White House released a statement by Jake Sullivan, National Security Advisor to the President of the United States. Sullivan announced that the United States would impose new sanctions on Iran "in the coming days" to punish Iran for missile and drone attacks on Israel.

The new sanctions will target Iran's missile and drone programs, as well as entities that provide support to Iran's Islamic Revolutionary Guard Corps and Iran's Ministry of Defense. The Islamic Revolutionary Guard Corps of Iran (IRGC) was created after the Islamic Revolution in 1979 and is independent of the Iranian military and is responsible for maintaining the regime in Iran. The Revolutionary Guards are directly under the orders of Iran's Supreme Leader and are Iran's most elite armed forces.

In international practice, a country's regular army is rarely classified as a terrorist organization. But when Donald Trump was president, he made Iran the number one enemy of the United States in the Middle East and exerted maximum pressure on Iran. He led the United States to unilaterally withdraw from the JCPOA in 2018 and then designated Iran's Islamic Revolutionary Guard Corps as a terrorist organization in 2019. This is also the first time that the United States has designated a country's regular army as a terrorist organization.

In the past three years, in addition to sanctions on Iran's missile and drone programs, the United States has sanctioned more than 600 individuals and entities linked to terrorism and supporting "proxies of terrorist organizations" such as Hamas, Allah in Lebanon and the Houthis in Yemen, Sullivan said. The United States will also continue to put pressure on Iran, and other allies will introduce new sanctions as soon as possible.

On the day of Sullivan's statement, U.S. Treasury Secretary Janet Yellen said that all options that could thwart Iran's "terrorist financing" were being considered in the new U.S. sanctions.

She said that the U.S. Treasury Department had previously hit Iran's ability to export oil, but that Iran continued to export oil, "and we may have more to do." Yellen declined to say what the U.S. was prepared to do, saying only that targeting Iranian oil was one of the possible options.

Iran is a major oil country, with the world's fourth-largest proven reserves of crude oil, and its production reached an all-time high of 6 million barrels per day in 1974. During the Pahlavi dynasty, Iran was not an adversary but an ally of the United States, and Iran had close ties with Israel. The Islamic Revolution in Iran in 1979 became a turning point.

The 1979 revolution overthrew the Pahlavi dynasty and also triggered the Tehran hostage crisis. Iranian protesters opposed to the United States occupied the U.S. Embassy in Iran, and 52 U.S. diplomats and civilians were detained. This hostage crisis lasted for more than a year and directly led to the re-election of then-US President Jimmy Carter.

The Tehran hostage crisis became the origin of the United States' hostility with Iran. Since 1979, the United States has imposed sanctions on Iran, and Iran's nuclear program has triggered permanent sanctions from the United Nations and the European Union. By 2013, Iran's crude exports had fallen below 1.3 million b/d.

In 2015, the nuclear deal reached between the six parties, including the United States, and Iran gave Iran a breather, and the international community lifted most of the sanctions on Iran, and the United Nations arms embargo on Iran expired and was not renewed. At the beginning of 2018, Iran's crude exports briefly recovered to 2.7 million b/d.

However, the Iran nuclear deal is a political achievement of the Democratic administration in the United States, and it was opposed by the Republican Party from the beginning. After Trump became president, the United States officially announced in May 2018 that it would unilaterally withdraw from the JCPOA and reinstate sanctions on Iran. Since then, Iran has continued to export oil through various channels, but no longer discloses the volume of its exports.

When Joseph Biden became president of the United States, he planned to restore the achievements of the Barack Obama era and begin negotiations with Iran to return to the JCPOA. The framework for a final agreement has been released, but the negotiations have not taken a final step until the start of the current round of the Israeli-Palestinian conflict.

During the negotiations, the United States eased some of its sanctions against Iran. Last September, the U.S. government signed a sanctions waiver that allowed Iran to transfer $6 billion of oil money frozen in South Korean banks to Qatar in exchange for Iran's release of five U.S. prisoners. Iran's crude oil exports have also recovered over the past year. Crude oil tracker Kpler estimates Iran's crude exports rose to 1.61 million b/d in March, the highest since May last year.

The U.S. House of Representatives is preparing to consider a series of new bills to sanction Iran in order to punish Iran for its attack on Israel. The Republican-controlled House of Representatives voted overwhelmingly on Monday to pass a bill aimed at sanctioning China's purchase of Iranian oil, citing Bloomberg.

The bill expands the scope of secondary sanctions against Iran to cover all transactions between Chinese financial institutions and sanctioned Iranian banks for the purchase of oil and petroleum products. The bill also requires the U.S. to determine annually whether a Chinese financial institution has engaged in "sanctionable conduct." Any transaction by a Chinese financial institution to buy oil from Iran is a "material financial transaction" and is subject to sanctions.

The spokesperson of the Chinese Foreign Ministry said earlier that China has always opposed unilateral sanctions and the so-called "long-arm jurisdiction", and that normal cooperation between China and Iran by the international community, including China, is reasonable and legal, and should be respected and protected.

The bill still needs to be voted on by the U.S. Senate, which is controlled by the Democrats. Reuters, the Washington Post and many other European and American media believe that a serious blow to Iran's oil exports will not only affect the United States' relations with other countries, but also push up international oil prices. The rise in international oil prices will lead to an increase in domestic gasoline prices in the United States, and in the United States presidential election year, the increase in gasoline prices will affect voter turnouts.

Bob McNally, president of the energy consultancy Rapidan Energy Group and a former White House official, expects international oil prices to soar to $100 a barrel if the United States storms Iranian oil exports. He believes that Biden, who is seeking re-election, will never want to see gasoline prices soar, so the United States is more likely to adopt some symbolic sanctions.

In addition to the United States will push sanctions, the European Union plans to hold a meeting on Wednesday local time to discuss new sanctions against Iran. EU officials have revealed that the new sanctions could target Iran's arms transportation networks that supply pro-Iranian forces.

The Netherlands, Sweden and the Czech Republic have also called for direct sanctions against Iran's Islamic Revolutionary Guard Corps, a proposal opposed by Germany and France. German officials have pointed out that Iran's Islamic Revolutionary Guard Corps has not launched attacks against EU members and that there is no legal condition to designate the IRGC as a terrorist organization. There are also EU officials who warn that targeting Iran's IRGC directly would lead to an escalation of tensions, rather than the de-escalation sought by the EU.

Also on the verge of announcing new sanctions against Iran is the G7. G7 member Britain is divided on whether to designate Iran's Islamic Revolutionary Guard Corps as a terrorist organization, and the opposition fears that such a move will lead to a direct severance of diplomatic relations between Iran and the United Kingdom.

On Tuesday, British Foreign Secretary David Cameron arrived in Israel for talks with high-level Israeli counterforces on a counterattack against Iran, and Britain has made it clear that it does not support Israel's counterattack against Iran.

In an interview with Israeli media after the talks, Cameron said that Israel has decided to strike back at Iran, and he hopes that the counterattack will not lead to an escalation of regional tensions as much as possible.

According to a poll released by Israel's Hebrew University on the same day, 75 percent of respondents believe that Israel should not fight back if it will undermine Israel's security alliance with its allies. A further 56 percent of respondents believe that Israel should respond positively to the political and military needs of its allies.

On Tuesday, Israel's wartime cabinet met for the third time in three days to discuss a plan to counter Iran. Benny Gantz, a wartime cabinet member and leader of the opposition National Unity Party, said Israel would not act arbitrarily and would act on the basis of "strategic wisdom."