Obama Clears Way for Sanctions on Banks in Iran Oil Trade

President Barack Obama cleared the way for sanctions aimed at banks in countries that import Iranian oil, the latest U.S. step to ratchet up pressure on the government in Tehran over its nuclear program.

The president determined that world oil supplies are sufficient to proceed with the congressionally mandated sanctions designed to deny Iran income from oil exports, according to a memorandum released by the White House.

Under a law signed by Obama Dec. 31, banks that settle petroleum-related transactions through Iran’s central bank in any country that has failed to show a “significant reduction”in Iranian oil imports would be cut off from the U.S. banking system. The law requires reductions by June 28 and countries can avoid the sanctions if they take steps by then. The president didn’t set targets for reductions.

Additional Sanctions

The penalties are among dozens of measures adopted by the U.S. and the European Union since November in the standoff with Iran. The EU banned new oil contracts with Iran on Jan. 23 and embargoed all Iranian oil effective July 1. The U.S., Europe andIsrael

have accused Iran of seeking the capability to build a nuclear weapon. Iran says its program is solely for civilian energy and medical research.

U.S. Secretary of State Hillary Clinton on March 20 granted an initial group of six-month, renewable exemptions from the sanctions to Japan and 10 European Union nations for having detailed plans for curtailing imports of Iranian oil.

China, India, South Korea, Turkey and eight other buyers of Iranian crude haven’t yet made similar pledges. The U.S. is in talks with those nations to reach an agreement before the deadline, according to an administration official who briefed reporters on condition of anonymity. The sanctions were the subject of discussions when Obama was in South Korea earlier this week for a nuclear security summit, the official said.

Monitoring Supplies

Obama was required to make a determination on whether sanctions can be imposed without roiling oil markets, based on the availability of non-Iranian crude.

The U.S. Energy Information Administration, under the terms of the law, said on Feb. 29 that excluding Iran from the global oil market would widen the gap between worldwide supply and demand six-fold, based on production and consumption estimates. A second EIA report on the availability and price of petroleum produced in countries other than Iran is due April 29.

Guy Caruso, a former head of the EIA under President George W. Bush, said in an interview before Obama’s decision that there would be little effect on gasoline prices because of the sanctions.