U.S. officials say the threat of harsher sanctions — combined with a European oil embargo scheduled to begin July 1 — is already costing Iran billions of dollars in lost revenue as the country’s traditional customers begin to turn elsewhere for petroleum. At the same time, administration officials and oil analysts say they are increasingly confident that Saudi Arabia and other suppliers can make up for Iran’s shortfall, easing the risk of global shortages and further price spikes.
“We are fully prepared to go forward with these sanctions,” a senior administration official told reporters Friday. “The best outcome here is to have the broadest number of countries working together to send a clear message to Iran.”
The new measures are intended to pressure Iran into agreeing to strict curbs on its nuclear program at negotiations set to begin in mid-April. Western officials are describing the talks as a last best chance for a diplomatic settlement of an Iranian nuclear crisis that has driven up oil prices while spurring fears of military strikes.
The price of Brent crude rose 49 cents Friday to finish at $122.88 per barrel.
Western intelligence agencies believe that Iran is using its ostensibly civilian nuclear infrastructure to develop the components for nuclear weapons, a charge Iran vehemently denies.
The administration’s decision to press forward with deeper sanctions highlights the political risks confronting President Obama. Sharp cuts in Iranian oil could drive energy prices higher, alienating middle-class voters upon whom Obama depends for reelection.
At the same time, a failure to back painful sanctions against Iran could invite attacks by the president’s Republican rivals while also raising the risk of a unilateral military strike by Israel against Iranian nuclear facilities.
The new sanctions, signed into law in December, target the Central Bank of Iran, the financial institution that processes payments for nearly all of Iran’s foreign oil sales. One provision, set to take effect June 28, imposes sanctions on any foreign bank or company that continues to engage in oil transactions with the Iranian central bank.
The administration has granted waivers to 11 countries that have agreed to end or sharply reduce oil imports from Iran, and its diplomats are encouraging Iran’s remaining customers to agree to similar cuts. On Friday, Turkey, a major consumer of Iranian oil, announced that it would slash Iranian imports by 10 percent. Turkish officials were in talks with Saudi Arabia about making up the shortfall.