Iran's economy to suffer but likely ride out USA sanctions

Workers at an onshore Iranian oil facility

Iranian Foreign Minister Mohammad Javad Zarif said that United States President Donald Trump's administration will "regret" the newly-imposed sanctions on his country. With major cuts in the cheaper oil imports from Iran, the overall oil import bill is bound to rise further with its consequent adverse effect for the economy.

After extensive consideration, the secretary has provided for an exception from the imposition of certain sanctions under the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) with respect to the development of Chabahar Port and the construction of an associated railway and for the shipment of non-sanctionable goods through the port for Afghanistan's use, as well as Afghanistan's continued imports of Iranian petroleum products.

China's crude imports rose to 9.61 million barrels per day (bpd) in October, up 32 per cent from a year earlier, customs data showed.

JP Morgan said "the lack or difficulty in acquiring shipping insurance will help in reducing exports quickly as they did during last worldwide sanctions".

Crude has been weighed down by signs of eroding global economic growth, wilting demand and even the U.S.'s decision to offer waivers on sanctions of Iran. At first glance, this would seem improbable, given the way the government is trying to project the temporary waiver from sanctions given to India and seven other countries.

For further details, see below.

India has "demonstrated" significant reductions in its crude oil imports from Iran.

Several Chinese sources with knowledge of the matter said China would be allowed to buy 360,000 bpd of Iranian crude during the exemption period of 180 days. It makes the United States the world's biggest producer of crude.

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India is the world's third-biggest oil importer. The EU is preparing a special mechanism to enable payments for Iranian oil and other exports without U.S. dollars, possibly through a barter system.

India has invested heavily in developing Chabahar, which provides strategic access not just to Iran but Central Asia, bypassing Pakistan.

A collision between an oil tanker and a military frigate off Norway's coast temporarily shut down the nation's largest crude-export terminal, halted the pumping of several North Sea grades, and boosted immediate natural gas prices in the United Kingdom.

A close US ally, South Korea had stopped buying crude from Iran ahead of the sanctions while still lobbying for exemptions.

The won-denominated payments will go into escrow accounts handled by the Industrial Bank of Korea (IBK) and Woori Bank.

Early on Monday the United States imposed its "toughest ever" sanctions on Iran that it had earlier lifted after the signing of the nuclear agreement in July, 2015 between Tehran and Russia, China, the UK, France, Germany and the US.

Japan's trade minister, Hiroshige Seko, said on Tuesday that Japanese buyers were expected to resume imports from the Islamic Republic again soon.

Italy and Turkey have been importing around 200,000 bpd of oil from Iran over the past two years, with Greece importing less than 100,000 bpd.

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