Deep Disagreement in Trump's Team Over Extension or Non-Extension of Oil Sanctions for Eight Countries

Bloomberg reported on Tuesday, April 6, that there is a "deep disagreement" among members of Donald Trump's security and diplomatic team regarding the cessation of Iranian oil exports. The six-month opportunity granted by the U.S. to eight Iranian oil customers for limited imports will end in May. According to four unnamed sources, the disagreement has escalated between the National Security Council team led by John Bolton and Secretary of State Mike Pompeo's team regarding how to make decisions about Iranian oil exports. Bloomberg notes that ultimately Trump will make the final decision, but the issue is that cutting Iranian oil exports aligns with the President's policies for applying "maximum pressure" on the Islamic Republic and stopping its missile program and support for Hezbollah. However, tightening the sanctions on Iranian oil could lead to a spike in global oil prices. Traditionally, this could cause an increase in gasoline prices in the U.S. ahead of the 2020 presidential election, negatively affecting Republican votes. Bolton's team believes that tightening the sanctions will not raise oil prices and they will remain at current levels. As of Wednesday, April 7, U.S. benchmark oil prices were below $60 and Brent oil prices were below $68. Bloomberg cites informed sources stating that Larry Kudlow, Trump's senior economic advisor, defended this view during a meeting between the U.S. President and Israel on Monday, saying that not extending the oil exemptions for Iranian customers would not raise oil prices. In contrast, the U.S. State Department, led by Mike Pompeo, recommends that some exemptions for Iranian oil customers continue. Since the U.S. withdrawal from the JCPOA, Iranian oil production has decreased by more than 1.1 million barrels, falling below 2.7 million barrels. Iranian crude oil and gas condensate exports have also dropped from over 2.5 million barrels to about 1.1 to 1.2 million barrels. China, India, South Korea, Japan, Taiwan, Turkey, Italy, and Greece have until May to continue limited purchases of Iranian oil, although Taiwan, Italy, and Greece have not utilized their extensions and have halted Iranian oil imports. The report adds that this situation also depends on OPEC's decisions, as well as U.S. oil sanctions against Venezuela to pressure Nicolás Maduro to relinquish power. OPEC and its allied countries led by Russia decided late last year to reduce their daily production by about 1.2 million barrels in the first half of 2019, and it is unclear whether this decision will be extended for the second half of the year. Venezuela's production has also been rapidly declining following U.S. sanctions in January. Megan Sullivan, a former deputy national security advisor, told Bloomberg that the Trump administration is prepared to raise oil prices to $70 (from the current level below $60), but it is a difficult decision as simultaneous strict policies against both Iran and Venezuela could create problems for global oil prices. A National Security Council spokesperson told the news agency that all coordination for "maximum pressure" against Iran is ongoing. A State Department spokesperson also stated that the U.S. goal of bringing Iranian oil exports to zero remains in effect, but the department recommends that some exemptions for Iranian oil customers continue. So far, U.S. sanctions have had an impact. Iranian oil exports have halved, the rial has lost two-thirds of its value, and the country is grappling with economic problems. Even Ayatollah Khamenei, the leader of Iran, recently said that "the Europeans' efforts to continue trade with Iran despite U.S. sanctions is like a joke." According to Bloomberg, China and India, as Iran's largest oil customers, may be able to obtain exemptions from the U.S. again, but Bolton and his team believe that now is the right time to completely cut Iranian oil exports. The report adds that the State Department team is concerned about rising oil prices with another reduction of 1.1 million barrels in Iranian oil exports and bringing it to zero: "Especially Pompeo is under pressure from some of his ambassadors, including the U.S. representative to NATO, as not extending the U.S. exemption for Turkey, a NATO member, sends a 'wrong message' to U.S. allies.