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Takeaway: Oil Sanctions Go into Full Effect November 5; Don’t expect waivers.

Editor's Note: Below is an abridged institutional research note written by Senior Energy Policy analyst Joseph McMonigle. To read all of our institutional Energy Policy research email sales@hedgeye.com.

First Wave of Iran Sanctions Begin August 6 – Pistachios, Persian Rugs & Planes - iranian flag

Monday, August 6 is D-Day for the first wave of reimposed US nuclear sanctions on Iran stemming from President Trump's May 8 withdrawal from the Iran nuclear deal. The reinstated US nuclear sanctions on the Iranian regime are subject to certain 90-day and 180-day wind-down periods as per guidance from the US Treasury Department.

This first wave of sanctions go into effect following the 90-day wind-down period that concludes on August 6. The big impact on this date comes from sanctions on sales of airplane and airplane parts that were a key component of the deal for Iran and affects Boeing and Airbus in particular. Other sanctions will start on: pistachios and other food stuffs; Persian carpets; gold and precious metals; steel, aluminum and coal; and sovereign debt and other financial transactions.  

Oil sanctions on Iran go into effect on November 5 after the 180-day wind-down period and include sanctions on Iranian ports and shipping sector; petroleum-related transactions and the purchase of petroleum, petroleum products or petrochemical products; transactions by foreign financial institutions with the Central Bank of Iran; underwriting services, insurance or reinsurance; and on Iran’s energy sector.

Trump said on May 8 that the US would impose the “highest level of economic sanctions” on Iran adding that “any nation that assists Iran will also be subject to sanctions.” 

To date, Trump has 1) decertified the Iran deal last October; 2) reinstated oil sanctions in May; and 3) informed other countries that there will be “zero waivers” from US sanctions in July. Now we can add implementation of the first wave of sanctions on August 6 to the list of actions taken. 

Still, many market watchers and analysts continue to doubt Trump’s consistent Iran policy despite clear evidence to the contrary.  Their theory is that higher gasoline prices before the US midterm congressional elections will cause Trump to backtrack. Don’t count on it.

Instead, Trump asked Saudi Arabia and other Gulf producers in the anti-Iran coalition to increase production to buffer high oil prices.  Media reports indicate that Saudi Arabia, UAE and Kuwait have increased production in response to requests from the US and other consumers since oil prices spiked to $80 in May.

These Gulf producers, who support tough US action on Iran, seem determined to keep oil prices in check at least through the US midterm congressional election on November 6 - the same day Iran oil sanctions go into effect. If successful, their action should also keep NOPEC legislation and a SPR release at bay too.