WASHINGTON — Coordinated pressure by the Obama administration and its European allies has caused a rapid fall in oil revenue to Iran, squeezing that nation’s economy ahead of nuclear talks next month, U.S. officials and industry analysts said Friday.
The financial pain is likely to increase in the months ahead. On Friday, the White House formally certified that global oil supplies are sufficient to accommodate deeper cuts in Iranian oil imports, a technical step that clears the way for the implementation of even tougher economic sanctions set to take effect three months from now.
U.S. officials say the threat of harsher sanctions, combined with a European oil embargo scheduled to begin July 1, is already costing Iran billions of dollars in lost revenue as the country’s traditional customers begin to turn elsewhere for petroleum. At the same time, administration officials and oil analysts say they are increasingly confident that Saudi Arabia and other suppliers can make up for Iran’s shortfall, easing the risk of global shortages and further price spikes.
“We are fully prepared to go forward with these sanctions,” a senior administration official told reporters Friday. “The best outcome here is to have the broadest number of countries working together to send a clear message to Iran.”
The new measures are intended to pressure Iran into agreeing to strict curbs on its nuclear program at negotiations set to begin in mid-April. Western officials are describing the talks as a last best chance for a diplomatic settlement of an Iranian nuclear crisis that has driven up oil prices while spurring fears of military strikes.
The price of Brent crude rose 49 cents Friday to finish at $122.88 per barrel.
Western intelligence agencies think that Iran is using its ostensibly civilian nuclear infrastructure to develop the components for nuclear weapons, a charge Iran denies.
The administration’s decision to press forward with deeper sanctions highlights the political risks confronting President Barack Obama. Cuts in Iranian oil could drive energy prices higher, alienating middle-class voters upon whom Obama depends for re-election.
At the same time, a failure to back sanctions against Iran could invite attacks by the president’s Republican rivals while also raising the risk of a unilateral military strike by Israel against Iranian nuclear facilities.
The sanctions, signed into law in December, target the Central Bank of Iran, the financial institution that processes payments for nearly all of Iran’s foreign oil sales.
One provision, set to take effect June 28, imposes sanctions on any foreign bank or company that continues to engage in oil transactions with the Iranian central bank.
Already, the cuts have had an impact on Iran’s economy and its currency, the rial. The pressure will soon become “greater than anything Iran has faced before,” said the senior administration official, who insisted on anonymity in describing the conclusions of U.S. economic assessments.
