Economic realities moderate Trump's hard line on Iran

WASHINGTON (AP) — The Trump administration was caught between allies at home and abroad and the reality of global economics as it reinstated sanctions Monday on Iran, forced to carve out exemptions for important allies and back off on measures that could have been even more punishing for Tehran.

The U.S. granted waivers to allow China and seven close U.S. partners and allies to continue importing Iranian crude and other petroleum products without penalty, bowing to concerns that a complete end to Iran's exports would cause a major spike in world oil prices and cause other economic disruptions. Trump conceded that reality on his way to a last-minute campaign event a day before critical midterm congressional elections.

"We have the toughest sanctions ever imposed but on oil we want to go a little bit slower because I don't want to drive the oil prices in the world," he told reporters. "I could get the Iran oil down to zero immediately, but it would cause a shock to the market."

The newly reinstated sanctions target Iran's energy, financial and shipping sectors and are aimed at forcing Iran to end ballistic missile program and end its support for armed movements throughout the Middle East.

The measures restore all the U.S. sanctions that had been lifted under the 2015 accord that gave Iran billions of dollars in sanctions relief in exchange for curbs on its nuclear program, a deal that Obama administration critics had argued was too soft on the Islamic Republic.

In reinstating the measures, the Treasury Department imposed penalties on more than 700 Iranian and Iranian-linked individuals, entities, aircraft and vessels. Among those are 50 Iranian banks and subsidiaries, more than 200 people and ships, Iran's state-run airline Iran Air and more than 65 of its planes.

The sanctions freeze any assets that those targeted have in U.S. jurisdictions and bar Americans from doing business with them. They will also affect non-Iranian companies that deal with sanctioned Iranian firms and officials.

Yet, while the administration seeks to cut off Iran's oil revenue, it is allowing Greece, India, Italy, Japan, South Korea, Taiwan and Turkey to continue purchasing Iranian oil as long as they work to reduce imports to zero.

"When I look at the list, it's obviously very large economies that still in many ways depend on Iran oil imports and at this time don't have any strong alternatives," said Brian Katulis, a senior fellow at Center for American Progress, a liberal think tank.

"This is part of the Trump team's trying to balance its maximum pressure campaign against Iran versus its concerns over where the global prices of oil might go and how that could negatively impact everyone including America. I don't support this policy, but if you are going down this path, it's a way to lessen the risk of economic blowback in America."

Three of the eight waiver recipients — Greece, Italy and Turkey — are members of NATO. Japan and South Korea have mutual defense treaties with the U.S. and have a key part in the North Korea denuclearization initiative. India, the world's largest democracy, plays a critical role in the administration's "Indo-Pacific" strategy, which seeks to unite countries in the region into forming a bloc to counter China's growing assertiveness.

All of them lobbied heavily to be granted the six-month exemptions while promising to further reduce or end their imports and Secretary of State Mike Pompeo said the waivers were based on the specific circumstances of each and the need "to ensure a well-supplied oil market."

China is the single-largest importer of Iranian oil and forcing it to look elsewhere to fuel its dynamic economy would likely have rocked the market.

For some waiver recipients, domestic concerns were paramount.

South Korea, for example, is reliant on oil imports to drive its economy. It had been consultation with the Trump administration since the U.S. pullout from the Iran nuclear deal in May. Seoul says it will reduce oil imports from Iran by a "significant" amount but the waiver will allow it to maintain a stable supply of a light form of crude known as condensate.

Seeking to deflect criticism from some Iran hawks concerned that the sanctions don't go far enough, Pompeo stressed that U.S. pressure on countries to stop buying Iranian oil had already reduced its exports by more than a million barrels of crude per day costing the country $2.5 billion revenue.

Some leading Iran hawks appeared to agree with the administration's approach.

"We are encouraged that these waivers will only be temporary and one-time," said United Against a Nuclear Iran, a prominent group that was harshly critical of the nuclear deal and the sanctions relief it brought.

In addition to the oil exemptions, Pompeo said limited waivers had been issued to allow European and other firms to continue conversion work on three of Iran's nuclear facilities.

"Permitting these specific activities to continue is an interim measure that preserves oversight of Iran's civil nuclear program," the State Department said. "This oversight enhances our ability to constrain Iran's program and keep pressure on the regime while we pursue a new, stronger deal."