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Takeaway: Don’t call them waivers: US negotiating extension with 8 countries to get compliance to zero imports; Funds must go into escrow.

US Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin this morning held a background briefing for reporters on Iran sanctions. Pompeo told reporters that US sanctions on Iran that go into effect on Monday will reduce its exports by 1 million barrels per day (b/d) even while the compliance deadline will be extended for 8 countries to get to compliance to zero imports. 

A condition of the extension is that the country must substantially reduce its exports on a path to zero. The extension is not a period to continue at previous full import levels. 

Additionally, the US is negotiating a condition that sale proceeds must go into an escrow account in the local currency of the importer. The escrow can only be tapped for humanitarian purposes so the administration is making the case that any oil or condensate sale proceeds during the temporary period won't go to Iran. We think the escrow condition raises questions about whether Iran will even make the sales.

We wrote in our Wednesday note that the US *could* give some countries more time to comply with zero imports but we should not call them waivers.  This is only a grace period or extensions for some countries with special circumstances to get to zero. We wrote that the extension would be a month or two but now it looks like it could be 3-4 months. Bloomberg’s article by its national security reporter Nick Wadhams is correctly describing as the deadline extensions as "temporary."

We believe the countries/jurisdictions receiving an extension include China, Turkey, India, Japan, South Korea and Taiwan. Press reports have also confirmed these countries. Secretary Pompeo said in the morning briefing that the EU will not receive an extension but added the US was still in negotiations with countries so the full list will be released on Monday.