Oil prices have surged following the Trump administration's demand to other countries to cut all oil imports from Iran by November 4th.
The demands came after US Officials of State and Treasury Department staff were despatched to Europe and Asia in recent weeks to garner support for the Trump administration's Iran strategy, telling allies to cut Iran off as a source of petroleum.
After the decision, US crude spiked 2.5% on the morning of Wednesday June 27th, jumping to $72 a barrel (the highest point since May). Brent crude, the global benchmark, stood at around $76 a barrel.
On Tuesday, the administration said it was pushing foreign countries to cut their oil imports from Iran to zero by November 4th. Previously, the administration had said that countries should make a "significant reduction" in their imports of Iranian oil or be subject to separate US sanctions prohibiting all transactions between their central banks and Iran's central bank.
A senior State Department official said the administration is now telling European and Asian countries that the US expects their imports to hit zero by the time the grace period ends. A US team from the State Department and the National Security Council is currently in Europe delivering the message, said the official who was not authorized to speak publicly on the matter and spoke to reporters on condition of anonymity. The official added that the US is working with other Middle Eastern countries to increase production so the global oil supply remains steady.
The official said the US plans to engage with other countries in the Middle East to "ensure that the global supply of oil is not adversely affected by these sanctions."
The step had been expected since May when Trump pulled the US out of the landmark agreement under which Iran was given relief from sanctions in return for curbs on its nuclear program. Trump said the accord, a signature foreign policy achievement of his predecessor, President Barack Obama, was the worst deal ever negotiated by the United States because it gave Iran too much in return for too little. Trump also complained that the agreement did not cover Iran's non-nuclear malign behaviour.
Other parties to the deal — Britain, China, Germany, France, Russia and the European Union — have criticized the US withdrawal, which has left the agreement at risk of collapse. The Trump administration is stepping up efforts to isolate Iran and its faltering economy from international financial and trading systems.
Meanwhile, one of the biggest buyers of Iranian oil is unlikely to comply in full with US demands to reduce imports to zero. India said on Wednesday it did not recognise sanctions the United States has threatened to impose on countries that continue to buy Iranian oil after November 4th.
Iran is India's third-largest oil supplier after Iraq and Saudi Arabia, according to Indian government data. And India buys more Iranian oil than any country except China. Analysts say the Indian government is unlikely to heed the US call.
"More than China, India is unlikely to capitulate to the US demand," analysts at the Eurasia Group wrote in a note on Tuesday. They estimate that India is currently buying about 700,000 barrels per day from Iran, a critical and strategic source of supply to meet India's growing demand for energy. "India's state-owned refiners will likely continue to import Iranian crude," they said.
US Ambassador to the United Nations Nikki Haley travelled to meet India's Prime Minister Narendra Modi. She told him on Wednesday that it was important that India cut its dependence on Iranian oil and said the United States would work to allow India to use an Iranian port as a corridor to Afghanistan.