Once a major customer, the U.S. hasn’t bought oil from Iran for more than 25 years. How, then, can it lead a global movement to stop Iran from selling its chief export? The answer is simple: Any nation continuing to buy Iranian oil will face U.S. sanctions, Secretary of State Michael Pompeo said Monday after announcing temporary waivers granted to some nations late last year won’t be renewed when they expire on May 2.

1. How can the U.S. tell other countries what not to buy?

As with other sanctions campaigns, U.S. leverage rests with the central role American banks -- and the U.S. dollar -- still play in the global economy. So any country, company or bank that violates the terms of the U.S. sanctions could see their U.S.-based assets blocked or lose the ability to move money to or through accounts held in the U.S. In essence, the Trump administration is betting that nations, banks and businesses worldwide will decide they’d rather do business with the U.S.

2. Will everybody cooperate in this?

Pompeo’s announcement that “we’re going to zero” on Iranian oil exports risks upsetting major importers such as China and India, both recipients of waivers. China accused the U.S. of reaching beyond its jurisdiction. Japan’s chief cabinet secretary, Yoshihide Suga, said the government had kept in close contact with the U.S. and expressed the view that “there should be no damage to the activities of Japanese companies.” State-run Indian Oil Corp. -- the nation’s bigger refiner -- has been lining up alternative suppliers since last year to hedge against the loss of Iranian crude.

3. How much oil is at risk?

Combined shipments of crude and condensate from Iran declined to 1.14 million barrels a day in the first two weeks of April from 1.53 million during the same period in March, as buyers scaled back purchases before the expiration of waivers, according to tanker-tracking data compiled by Bloomberg. Iran was pumping close to 4 million barrels a day in the first half of 2018, with more than half of that going to exports.

4. Where does Iran sell most of its crude?

Iran shipped mostly to buyers in Asia, with Europe running a close second. China and India, two of the biggest oil importers, featured prominently on its list of buyers, as did Turkey, Japan and South Korea. One person familiar with Monday’s announcement said some countries that previously received waivers would get a little more time to wind down their purchases. The person described that not as a waiver but more as a brief grace period.

5. Where else will oil come from?

The U.S., Saudi Arabia, United Arab Emirates and others are committed to ensuring oil markets “remain adequately supplied,” according to the White House in a statement Monday. To that end, Saudi Energy Minister Khalid Al-Falih said the kingdom will coordinate with other oil producers to ensure sufficient supplies are available to consumers while ensuring the global oil market “does not go out of balance.”

6. How did we get here?

The 2015 Iran nuclear deal -- which eased economic sanctions on the Islamic Republic in exchange for restrictions on its nuclear program -- allowed Iran to resume selling oil widely. Despite broad international support for the accord, Trump and his allies said the deal never addressed what they see as Iran’s malign behavior in the Middle East, its support for terrorism or its ballistic missile program. Trump wants a new, tougher deal, and to get it, he’s decided not to renew the waivers.

--With assistance from Stephen Cunningham.

To contact the reporters on this story: Laurence Arnold in Washington at larnold4@bloomberg.net;Nick Wadhams in Washington at nwadhams@bloomberg.net

To contact the editors responsible for this story: Leah Harrison Singer at lharrison@bloomberg.net, Reg Gale, Stephen Cunningham

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