As Trump exits JCPOA, Iran oil buyers face November 4 deadline for US curbs

US sanctions related to Iran’s oil exports will kick in on November 4 at the end of a “wind down period”, after which large buyers such as India might come under American pressure to begin weaning themselves off Iranian oil.

On Tuesday, US President Donald Trump, while announcing the decision to leave the Iran nuclear deal, said he will order “reinstating US nuclear sanctions on the Iranian regime. We will be instituting the highest level of economic sanction”.

India is the second largest buyer of Iran’s oil. When the sanctions — secondary sanctions applicable to foreign companies and entities — are fully in place, the US will expect India to go off Iranian oil at the threat of punitive actions that remain undefined, but could include being shut out of the US banking system.

“We have experienced this before, but though we are wiser from the last experience we are really on uncertain ground here,” an Indian official said on condition of anonymity, referring to UN sanctions reinforced by then US president Barack Obama and EU curbs that were lifted after the 2015 deal.

Most observers had expected Trump to order to reinstate a sanction on Iran’s central bank, which was under a waiver related to the nuclear deal. “Not the full menu,” said a Western diplomat, admitting to have been taken aback.

These sanctions will go into effect in two tranches and on two different dates, the US treasury said. They will factor in “wind down” periods — time that countries, businesses and entities will need to end their on-going contracts in Iran.

The first “wind down” period ends on August 6, and sanctions in this category will cover trade in Iranian gold and precious metals, aluminium, steel, coal, Iranian currency and other items.

The next sanctions kick in on November 4, covering Iranian shipping, ports, petroleum related goods and products, the Iranian central bank and the entire financial system of the country.

As a large importer of Iranian oil, India might be working towards to the November 4 deadline in a situation similar to the one it faced up until the signing of the JCPOA, when it cut its purchases in phases closely monitored and certified by the US state department, having to prove significant reduction every 180 days.

As Iran was shut out of the international financial system, it agreed to accept payments in rupees, which it used to buy wheat, pharmaceuticals, rice, sugar, soybeans and others goods from India. But a reported $6.5 billion remained outstanding, which India paid after the JCPOA was signed.