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US reimposes Iran sanctions, Tehran decries ‘bullying’ (Update 3)

Iranian people burn the U.S. flag as they mark the anniversary of the seizure of the U.S. Embassy, in Tehran, Iran, November 4, 2018. Tasnim News Agency /Handout via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. NO RESALES. NO ARCHIVES

The United States on Monday restored sanctions targeting Iran’s oil, banking and transportation sectors and threatened more action to stop its “outlaw” policies, steps the Islamic Republic called economic warfare and vowed to defy.

The measures are part of a wider effort by U.S. President Donald Trump to curb Tehran’s missile and nuclear programs and diminish the Islamic Republic’s influence in the Middle East, notably its support for proxies in Syria, Yemen and Lebanon.

Trump’s moves target Iran’s main source of revenue – its oil exports – as well as its financial sector, essentially making 50 Iranian banks and their subsidiaries off limits to foreign banks on pain of losing access to the U.S. financial system.

The return of the sanctions was triggered by Trump’s May 8 decision to abandon the 2015 Iran nuclear deal, negotiated with five other world powers during Democratic President Barack Obama’s administration. That agreement had removed many U.S. and other economic sanctions from Iran in return for Tehran’s commitment to curtail its nuclear program.

Trump denounced the deal because of time limits on some of Iran’s nuclear activities, as well as for its failure to address other Iranian activity that the United States does not like.

In abandoning the agreement and imposing sanctions that it had lifted as well as adding new ones, the United States is betting the economic pressure will force Iran to change its behavior and agree to a new, much more restrictive deal.

“The Iranian regime has a choice: it can either do a 180-degree turn from its outlaw course of action and act like a normal country, or it can see its economy crumble,” U.S. Secretary of State Mike Pompeo told reporters.

“We hope a new agreement with Iran is possible.”

Speaking before Pompeo detailed the U.S. sanctions, Iranian President Hassan Rouhani accused the United States of targeting ordinary Iranians and said the Islamic Republic would find a way to “continue to sell our oil … to break sanctions.”

“The enemy is targeting our economy … the main target of sanctions is our people,” he said. “This is an economic war against Iran.”

“BULLYING”

Some analysts are skeptical Iran will knuckle under to U.S. pressure, at least in the short term.

“The increasing pressures on Iran will not change the behavior of the regime any time soon,” said Dennis Ross, a former U.S. official now at the Washington Institute for Near East Policy.

Iranian Foreign Minister Mohammad Javad Zarif said U.S. “bullying” was backfiring by making Washington more isolated, a reference to other world powers opposed to the initiative. The other parties to the 2015 nuclear deal, Britain, China, France, Germany and Russia, have said they will stay in it.

The sanctions are designed, in part, to force Iran’s main customers to stop buying its oil. However, the United States gave temporary exceptions to eight importers – China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea – allowing them to keep buying from Iran.

Iraq has also been given an exemption, Brian Hook, the U.S. special representative for Iran, told reporters in a conference call, saying Iraq was working “on reducing Iran’s influence and opening Kirkuk, which would be another 200,000 barrels of oil.”

In June Iran said that Baghdad and Tehran had begun exchanging crude oil.

Crude from the Kirkuk field in northern Iraq is being shipped by truck to Iran. Tehran will use the oil in its refineries and will deliver the same amount of oil to Iraq’s southern ports, on the Gulf.

The sanctions also cover 50 Iranian banks and subsidiaries, more than 200 persons and vessels in its shipping sector, Tehran’s national airline, Iran Air, and more than 65 of its aircraft, a U.S. Treasury statement said.

The administration said it had toughened the sanctions by roughly 300 new designations on individuals and entities, and targeted more subsidiaries of Iranian companies than before.

EUROPEAN OPPOSITION

European powers that continue to back the nuclear deal said they opposed the reapplication of sanctions and major oil buyer China said it regretted the move.

Switzerland said it was holding talks with the United States and Iran about launching a humanitarian payment channel to help food and drugs keep flowing to Tehran.

U.S. sanctions permit trade in humanitarian goods such as food and pharmaceuticals but measures imposed on banks and trade restrictions could make such items more expensive as well as more difficult to pay for.

The United States will allow non-proliferation civil nuclear work at Arak, Bushehr and Fordow in Iran “under the strictest scrutiny,” the State Department said on Monday.

The Belgium-based SWIFT financial messaging service said it is suspending some unspecified Iranian banks’ access to its messaging system in the interests of the stability and integrity of the global financial system.

The head of Iran’s Central Bank, Abdolnassr Hemmati, said the country has taken necessary banking measures to continue trade after the U.S. move, Iranian state TV said.

The European Union, France, Germany and Britain said they regretted the U.S. decision and would seek to protect European companies doing legitimate business with Tehran.

Diplomats told Reuters last month that a new EU mechanism to facilitate payments for Iranian oil exports should be legally in place by Nov. 4 but not operational until early next year.

Trump told reporters he wanted to impose the oil sanctions slowly so as not to “cause a shock to the market.”

Oil prices were mixed on Monday after a steep five-day fall.

Brent crude LCOc1 futures rose 34 cents to settle at $73.17 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 4 cents to settle at $63.10 a barrel.

Prices rallied to near four-year highs in early October on expectations the imposition of sanctions would create a global supply shortage. However, news of the waivers last week sent prices lower as top buyers would continue to import Iranian oil.

Iran said it would defy the reimposition of more U.S. sanctions on Monday, condemning as “economic war” Washington’s attempt to curb Tehran’s missile and nuclear programs and weaken its influence in the Middle East.

The U.S. move restores sanctions lifted under a 2015 nuclear deal negotiated by the administration of President Barack Obama and five other world powers. It adds 300 new designations in Iran’s oil, shipping, insurance and banking sectors.

The European Union, which continues to back the nuclear deal, said it opposed the reimposition of sanctions and big oil buyer China said it regretted the move.

The restoration of sanctions is part of a wider effort by U.S. President Donald Trump to force Iran to curb its nuclear and missile programs as well as its support for proxy forces in Yemen, Syria, Lebanon and other parts of the Middle East.

U.S. Secretary of State Mike Pompeo said on Sunday the penalties set to return on Monday “are the toughest sanctions ever put in place on the Islamic Republic of Iran.”

However, Iran’s clerical rulers have dismissed concerns about the impact of sanctions on the economy.

“Today the enemy (the United States) is targeting our economy…the main target of sanctions is our people,” Iranian President Hassan Rouhani said.

“America wanted to cut to zero Iran’s oil sales…but we will continue to sell our oil…to break sanctions,” Rouhani told economists at a meeting broadcast live on state television.

The sanctions were illegal and unfair, he said.

“This is an economic war against Iran but … America should learn that it cannot use the language of force against Iran … We are prepared to resist any pressure,” Rouhani said.

Trump announced in May his government was withdrawing from what he called the “worst ever” agreement negotiated by the United States. Other parties to the deal, including Britain, France, Germany, China and Russia, say they will not leave.

The deal had seen most international financial and economic sanctions on Iran lifted in return for Tehran curbing its disputed nuclear activity under U.N. surveillance.

Details of the sanctions will be released at a news conference scheduled for 8:30 a.m. EST (1330 GMT) with Pompeo and Treasury Secretary Steven Mnuchin.

The European Union is opposed to the U.S. decision to reimpose oil and financial sanctions, European Economic Affairs Commissioner Pierre Moscovici said. “The European Union does not approve of it,” Moscovici told franceinfo radio.

China, India, South Korea, Japan and Turkey – all top importers of Iranian oil – are among eight countries expected to be given temporary exemptions from the sanctions to ensure crude oil prices are not destabilised.

The countries will deposit Iran’s revenue in an escrow account, U.S. officials have said.

The curbs come as the United States is focused on U.S. congressional and gubernatorial elections on Tuesday. Campaigning in Chattanooga, Tennessee, on Sunday, Trump said his “maximum pressure” against Iran was working.

“Iran is a much different country than it was when I took office,” said Trump, adding: “They wanted to take over the whole Middle East. Right now they just want to survive.”

To keep the deal alive, the remaining parties to the Iran accord are trying to maintain trade with Tehran, despite scepticism that this is possible.

Diplomats told Reuters last month that a new EU mechanism to facilitate payments for Iranian oil exports should be legally in place by Nov. 4 but not operational until early next year.

They cautioned, however, that no country had volunteered to host the entity, which was delaying the process.

“We are in regular contact with other signatories of the nuclear deal…setting up (a) mechanism to continue trade with the European Union will take time,” Iran’s Foreign Ministry spokesman Bahram Qasemi said in Tehran.

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