The US president, Barack Obama, vowed on Friday to forge ahead with tough sanctions on Iran, saying there was enough oil in the world market - including emergency stockpiles - to allow countries to cut Iranian imports.
In his decision, required by a sanctions law he signed in December, Obama said increased production by some countries as well as ‘the existence of strategic reserves’ helped him come to the conclusion that sanctions can advance.
‘I will closely monitor this situation to assure that the market can continue to accommodate a reduction in purchases of petroleum and petroleum products from Iran,’ he said in a statement.
Obama had been expected to press on with the sanctions to pressure Iran to curb its nuclear program, which the West suspects is a cover to develop atomic weapons but which Iran says is purely civilian.
The overt mention of government-controlled stockpiles may further stoke speculation that major consumer nations are preparing to tap their emergency stores this year.
‘I do think it was interesting that it was laid out there,’ said David Pumphrey, an analyst at the Centre for Strategic and International Studies.
‘It was sort of like a reminder that yes, this is part of the tool kit,’ said Pumphrey, a former Energy Department official.
Oil markets remain tight, the White House said. Surging gasoline prices have become a major issue in the presidential election campaign.
‘A series of production disruptions in South Sudan, Syria, Yemen, Nigeria, and the North Sea have removed oil from the market,’ the White House said in a statement.
France is in talks with the United States and Britain on a possible release of strategic oil stocks to push fuel prices lower, French ministers said on Wednesday.
Senior Obama administration officials told reporters that the United States views releasing emergency stocks as an option, but said no decision has been made on specific actions.
Oil prices briefly rallied by about 70 cents on the announcement, but later reversed gains to end almost flat as traders turned mindful of the possible use of reserves.
‘There’s been a shift from focus on a threat by Iran to close the Strait of Hormuz to whether or not reserves are going to be released,’ said Dominick Caglioti, a broker at Frontier Trading Co. in New York.
Going forward, Obama is required by law to determine every six months whether the price and supply of non-Iranian oil are sufficient to allow consumers to ‘significantly’ cut their purchases from Iran.
The law allows Obama, after June 28, to sanction foreign banks that carry out oil-related transactions with Iran’s central bank and effectively cut them off from the US financial system.
‘Today, we put on notice all nations that continue to import petroleum or petroleum products from Iran that they have three months to significantly reduce those purchases or risk the imposition of severe sanctions on their financial institutions,’ said Senator Robert Menendez, co-author of the sanctions law.