Iran sanctions drive oil price

September 4, 2018 - Oil has rallied more than 15 percent since mid-August -- close to its year high of $80 a barrel -- driven by the reintroduction from November 2018 of U.S. sanctions tied to Iran’s nuclear programme.

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When the United States pulled out of the Iran nuclear deal on May 8, the Trump administration reimposed all secondary sanctions against Iran, saying it would punish any country whose central bank engages in oil transactions with Iran’s central bank.

As the November 4 deadline approaches, Washington is ratcheting up the pressure on the leading importers of Iranian crude oil — China and India.

Chinese companies, which collectively imported more than 630,000 barrels of oil per day (b/d) in January, remain defiant against the U.S. sanctions threat, but Indian refineries have begun cancelling oil import contracts with Iran.

In 2017, India imported almost 40 percent of its oil, worth US$13 billion, from Iran. Indian imports increased from around 550,000 b/d in January to 710,9356 b/d in May, but have fallen in August to just 203,900 b/d under U.S. pressure.

After the Joint Comprehensive Plan of Action (JCPOA), better known as the Iran nuclear deal, was signed in the summer of 2015, New Delhi began making significant investments in Iranian infrastructure, including building petrochemical and fertiliser plants and developing Iran’s Chabahar port. The Trump administration’s sanctions could now disrupt all this investment.