US rejects calls for Iran sanctions relief for EU

Washington will not carve out exemptions for European and other countries as it prepares to reimpose sweeping sanctions on Iran's oil sector, US secretary of state Mike Pompeo said today.

"We understand that financial sanctions will impose challenges on our friends," but sanctions are an essential part of the administration's strategy on Iran, Pompeo said in a speech at conservative think tank the Heritage Foundation. Pompeo said the US will enforce sanctions on any company doing business with Iran regardless of concerns expressed by the EU about the effect of sanctions on European companies.

US sanctions on Iran's oil sector go into effect on 4 November. The US Treasury Department has advised foreign buyers of Iranian crude to start cutting imports now or risk facing penalties later. "Our sanctions will go into full effect and more are coming," Pompeo said.

Tehran says it will continue to abide by the terms of the Joint Comprehensive Plan of Action (JCPOA) so long as it receives "practical guarantees" from the EU and other parties to the JCPOA — China and Russia — that economic benefits from the agreements will continue despite the US action.

Doing so requires countering the effect of sanctions that would cut off access to the US financial system for any foreign commercial bank or financial institution that processes transactions on behalf of Iran, including its oil trade.

The European Commission is looking for ways to enable buyers of Iranian crude to bypass the US financial system. Possible shortcuts include enabling the European Investment Bank to finance activities in Iran and providing for bank transfers from EU member states to the Iran central bank to help the country retain oil-related revenues. Europe accounts for about 30pc of Iranian crude exports of 2.1mn b/d.

The European Commission last week activated its "blocking statute" that in principle would forbid EU companies from complying with the extraterritorial effects of US sanctions and allow companies to recover damages from such sanctions from the US.

But German chancellor Angela Merkel on 18 May warned that "there must be no illusions here — the compensation will not be very large. These are economic decisions taken by the companies themselves."

The US administration at any rate plans to take active steps to persuade foreign companies to stop doing business with Iran. The Treasury Department in coming weeks will send teams of specialists around the world to explain the consequences of US sanctions, Pompeo said.

Pompeo outlined a strategy of applying strong pressure on Iran through financial sanctions until it capitulates and gives in to a long list of US demands on curbing Iran's nuclear and missile programs, ending support for its regional proxies and giving up what Washington sees as Iran's hostile behavior towards its Gulf Arab neighbors and Israel.

In addition to sanctions, the US military will work with its Middle Eastern partners to "counter Iranian aggression and protect the freedom of navigation," Pompeo said, a reference to US complaints about Iran's naval presence in the key arteries carrying out the world's oil and LNG traffic: the straits of Hormuz and Bab al-Mandeb.

In exchange for a full capitulation, the US will consider lifting the entirety of its sanctions on Iran, re-establishing diplomatic relations and reintegrating Iran into the global economy, all guaranteed via a treaty subject to approval by Congress. Iran should trust the seriousness of US intentions to find an understanding with Tehran as President Donald Trump is pursuing diplomacy with North Korea, Pompeo said.

Pompeo also seemed to advocate a regime change in Iran and blasted "some people in the west" for casting President Hassan Rohani and foreign minister Mohammad Javad Zarif as moderates.

The Iranian people should call Rohani and Zarif to account, Pompeo said. "Are they not responsible for your economic trouble, for wasting Iranian lives in the Middle East?"