Tehran has taken a firm stance ahead of the crunch US Congress sanctions vote in mid-December. Simon Watkins reports
From the moment US President Donald Trump refused to certify Iran’s compliance with the Iran Nuclear Agreement Review Act (INARA) on October 13, the clock has been ticking. At that point, Congress had 60 days to decide on the US’s next course of action by the close of business on December 12. With a full range of options for the US on the table, Iran has been laying down its own markers ahead of the deadline.
This has seen Tehran cast doubt over deals that have already been agreed, increasing the oil supply challenge to Saudi Arabia, and consolidating its geopolitical support from key countries should the US look to withdraw its backing for last year’s Joint Comprehensive Plan of Action (JCPOA).
Since Trump’s decision, Iran has dramatically upped the tempo of its efforts both to hold on to existing customers and to develop new ones for its crude oil supplies in the world’s top target market of Asia.
Specifically, NewsBase Intelligence (NBI) understands the National Iranian Oil Co. (NIOC) has been offering spot crude oil cargoes, ranging from light to heavy grades, to its term contract buyers in Asia at considerable discounts, both on a per barrel cost basis and on a per shipment freight cost basis.
Originally, these discounts were made to existing long-contract buyers – crucially, including the government-backed arrangements in place from when the original Western sanctions were intensified against Iran’s oil exports in 2012. However, they are now being offered to potential customers on the NIOC’s top client target list.
A senior oil and gas industry source who works closely with the Iran Ministry of Petroleum told NBI: “The reaction from these big existing customers was unanimously favourable – with notable actual increases in imports from Japan and India as from October. So Iran is confident that by offering these as well to some existing Saudi customers that have been wavering owing to the increasing political uncertainty there it will be able to steal some of them away,” he said.
These discounts are even more enticing as they come on top of a consistent lowering in the official selling price (OSP) of Iran’s Heavy crude oil pricing benchmark since Trump’s announcement on non-certification. The first such strategic cut by NIOC in the Heavy grade OSP occurred in October, before it was lowered again for December, which puts the December Heavy price at its widest discount against Saudi Arabia’s comparable Arab Medium grade OSP in over a decade.
At the same time, the OSP cuts for Iran Light leave it at its lowest premium in two years against Saudi’s OSP for the Arab Light grade.
Iran has also laid down a marker to companies that pledged to do business there since the JCPOA was implemented – either in a signed final contract or in an in-principle preliminary agreement – but Tehran might now be wavering in this commitment, owing to the US’s current stance on re-imposing sanctions.
Given that it was the first major deal signed by a Western IOC since the JCPOA came into effect, it is no surprise that Tehran has chosen France’s Total as the headline company for such warnings over the consequences of reconsidering these agreements.
The company was awarded a US$4.8 billion contract, including an initial payment of US$1 billion, to develop Phase 11 of the supergiant South Pars natural gas field.
Last week, Petroleum Minister Bijan Zangeneh warned Total that if it decided to walk away from the deal merely on the basis of the US pulling out of the JCPOA – without the United Nations Security Council (UNSC) itself also imposing new international sanctions against Iran – “No capital will be returned and no sum will be transferred to this company”.
In the event that the UNSC did join the US in rolling back the JCPOA and also imposed new sanctions then Zanganeh said that Total’s 50.1% stake in South Pars 11 would be taken by the other two members of the consortium – China National Petroleum Corp. (CNPC, 30%) and NIOC subsidiary Petropars (19.9%).
Total was also told that “if it did withdraw for this reason then it could forget any future involvement in Iran at all. It would lose all other money so far invested in field and development studies, including for South Azadegan,” the Iran source told NBI.
On a limb
Having said this, the chances of other key players involved in the JCPOA abandoning the deal even if the US were to do so appear remote.
“There is no chance whatsoever that Russia or China will cut back on their commitment to Iran any time soon, and this is two votes out of the five Permanent Members on the UN Security Council: the Russians because Iran is [their] key geopolitical ally in the Middle East, and China because of energy security needs,” said the source.
Although there are doubts about another Permanent Member – France – publically at least, French President Emmanuel Macron put his name on a recent joint statement with fellow Permanent Member the UK and also key mover Germany affirming support for the JCPOA deal, despite the US non-certification.
The source added that given German Chancellor Angela Merkel’s distaste for Trump and for the US following the Edward Snowden revelations showing that US intelligence agencies spied on European leaders, including Merkel, Germany remains a fierce advocate for the continuation of the JCPOA.
A statement of intent was sent at the time of the Trump announcement when the EU’s foreign policy chief, Federica Mogherini, said that the JCPOA agreement “is not a bilateral agreement. So it is clearly not in the hands of any president of any country in the world to terminate [it] … The president of the US has many powers, but not this one.”
More firmly, German Foreign Minister Sigmar Gabriel warned: “We also have to tell the Americans that their behaviour on the Iran issue will drive us Europeans into a common position with Russia and China against the US.”
Taking it to Tehran
Although some sceptics have dismissed this non-certification by Trump as no more than political posturing, NBI has been told by senior political sources in Tehran, Moscow and Washington that rolling back on the JCPOA is a cornerstone of Trump’s broader plan to change the regime in Tehran through non-military means.
Trump in recent days does not sound like he is engaging in gesture politics, having stated: “In the event we are not able to reach a solution working with Congress and our allies, then the agreement will be terminated. It is under continuous review, and our participation can be cancelled by me, as President, at any time.”
Two parts of this strategy having failed so far – to use the Kurdish independence movement in Iran to destabilise the country and to increase Saudi Arabia’s power in the region – said the Iran source, putting more onus on others to effect regime change.
One of these – ramping up economic pressure on Iran by increasingly sanctioning the activity of the economically powerful Islamic Revolutionary Guard Corps (IRGC) – remains on track. The other – putting more pressure on Congress to increase sanctions by amending the INARA in order that snapback sanctions are implemented does not just rest on the vote by December 13.
“In addition, other sanctions legislation is pending in Congress, including the ‘Iran Ballistic Missiles and International Sanctions Enforcement Act’, which would impose new sanctions that target Iran’s ballistic missile supply chain,” Anthony Rapa, a lawyer with legal firm Steptoe & Johnson in Washington, told NBI.
This re-framing of the issue of Iran’s nuclear programme to one that centres on the more easily provable ballistic missile testing capabilities remains the main ongoing lynchpin in the US trying to get the JCPOA deal re-drawn at the UN.
“The idea was that this could be done by the end of March 2018 but now, with the difficulty in getting the Europeans on board, and Russia and China unwavering in their support for Iran, the US plans have been pushed back, and look less certain to have any real chance of success,” concluded the Iran source.