US greenlights Iranian oil sales after ‘productive’ Switzerland talks

The United States on Monday eased long-standing sanctions on Iran by authorizing the sale of Iranian oil, a move aimed at advancing negotiations toward a broader peace agreement with Tehran. In exchange, Iran is expected to commit to nuclear inspections and ensure free passage through the strategically important Strait of Hormuz, as reported by Reuters.

Under a general license announced by the U.S. Treasury Department, the sale of Iranian crude oil, as well as petroleum and petrochemical products originating from Iran, will be permitted through August 21.

The license says Iranian oil can be imported into the U.S. when necessary to complete its sale, delivery or offloading. The U.S. has not meaningfully imported Iranian oil since Washington imposed measures after the 1979 revolution.

“In line with the ongoing productive talks in Switzerland, Iran has committed to free and open transit in the Strait of Hormuz and to permit International Atomic Energy Agency (IAEA) inspectors into their country,” Treasury Secretary Scott Bessent wrote on X.

“As part of the framework, Treasury has issued a temporary 60-day general license authorizing the production, delivery and sale of Iranian oil.”

Under a memorandum of understanding signed last week, Washington agreed to grant waivers allowing the export of Iranian crude oil, petroleum products, and derivatives, as well as related services, including banking, insurance, and transportation.

The license also permits payments to Iran in U.S. dollar-denominated funds.

However, the authorisation does not apply to certain jurisdictions, including Cuba, North Korea, and Crimea, which remain excluded from the arrangement.

Sanctions

Washington first sanctioned Iran in 1979 when revolutionary students seized the U.S. embassy in Tehran, holding diplomats hostage. Numerous additional sanctions have been imposed since then over the nuclear program and Iran's support for groups the U.S. deems terrorist organisations, Reuters reported.

Independent Chinese refiners have been the main buyers of sanctioned Iranian oil, taking advantage of deep discounts as others avoided such purchases. India, South Korea, Japan, Italy, Greece, Taiwan and Turkey were also major buyers of Iranian crude before U.S. sanctions were reimposed in 2018.

Mediators said on Monday that Washington and Tehran made “encouraging progress” at the first round of talks aimed at reaching a final peace deal. The talks began under the terms of the memorandum of understanding reached last week to extend a tenuous ceasefire from April for at least another 60 days.

Oil prices had risen sharply when Tehran started blockading the Strait of Hormuz, prompting a U.S. blockade of Iranian ports, but after the interim deal, fell to their lowest since before the war began on February 28 with U.S.-Israeli attacks on Iran.

Sumit Ritolia, senior manager for modelling at Kpler said, "With OFAC un sanctioning Iranian crude. I wouldn’t expect any meaningful crude deal by Indian refiners in the near term given U.S. sanctions / unsanctions policy flipflop and the geopolitical situation remains highly fluid." He added that the more realistic areas for engagement are LPG, petrochemicals, fertilizers, and broader energy cooperation. “Even there I would be cautious about expecting concrete outcomes given the uncertainty around sanctions relief and Washington’s policy stance. The US position is still quite unpredictable, which makes long-term commitments difficult for Indian buyers and government given US trade deal is still pending.”

The US first waived the sanctions on Iranian oil for a month on 20 March amid global supply woes. However, India has not imported significantly from the Gulf country despite the waiver.

According to data from Kpler, on in April, Indian refiners bought 133,000 barrels from Iran. The announcement has led to about 4% fall in oil prices. Around 9.20 PM, the August contract of Brent on the Intercontinental Exchange was trading at $77.29 per barrel, lower by 4.07% from its previous close.

The August contract of Brent on the NYMEX was down 3.39% at $73.36 a barrel.

Prashant Vashisht, senior vice president, and co-group head, corporate sector ratings, ICRA Ltd said: "The announcement of opening of Strait of Hormuz and issuance of a temporary 60-day general license authorising production, delivery and sale of Iranian crude are positive for the tight crude oil markets."

(With inputs from agencies)