US Treasury Considers Sanctions Relief for Iranian Oil to Ease Market Pressure
Treasury Secretary Scott Bessent has indicated that the United States may soon remove sanctions on approximately 140 million barrels of Iranian oil currently stranded on tankers at sea. This move is part of a broader strategy to increase global oil supply and combat soaring prices, which have exceeded $100 per barrel in recent weeks due to Iran's closure of the Strait of Hormuz.
Immediate Supply Boost Amid Middle East Crisis
During an appearance on Fox Business Network's Mornings With Maria, Bessent detailed the plan, noting that the stranded oil represents about 10 to 14 days of supply that was originally destined for China. "In essence, we will be using the Iranian barrels against the Iranians to keep the price down for the next 10 to 14 days as we continue this campaign," he explained. The closure of the Strait of Hormuz, a critical shipping lane, has disrupted global oil flows and led to attacks on tankers, exacerbating market volatility.
Precedent Set by Russian Oil Waiver
This potential action follows a similar recent step by the Treasury, which temporarily allowed the sale of sanctioned Russian oil stranded on tankers, adding around 130 million barrels to global supplies. A source familiar with the Treasury's planning revealed that if sanctions on Iranian oil are eased, a waiver similar to the one used for Russian oil could be implemented. This would permit sales of crude already at sea within a narrow time frame, accelerating its diversion from China to broader global markets.
"A potential waiver could accelerate the diversion of oil already destined for China into global markets more broadly, helping ensure adequate supply and blunting Iran's leverage over the Strait of Hormuz," said the anonymous source, who was not authorized to speak publicly.
Additional Measures to Increase Physical Supply
Bessent emphasized that the US would take further actions to bolster oil supply, including a unilateral release from the Strategic Petroleum Reserve beyond last week's coordinated G7 release of 400 million barrels. He clarified that the Treasury would not intervene in oil futures markets but would focus on increasing physical supplies to address the daily deficit of 10 to 14 million barrels caused by the Strait of Hormuz closure. "So, to be clear, we're not intervening in the financial markets. We are supplying the physical markets," Bessent stated.
Expert Skepticism and Long-Term Concerns
Despite the immediate goals, experts have expressed skepticism about the long-term impact of Bessent's proposal. David Tannenbaum of Blackstone Compliance Services criticized the move, telling the BBC, "To put it mildly, this is bananas. Essentially, we're allowing Iran to sell oil, which could then be used to fund the war effort." Similarly, Alex Zerden, founder of Capitol Peak Strategies, warned the New York Times that Iran could profit from these sales, potentially funding its regime and proxies. "I don't think this stopgap measure will provide the market with assurance," he added.
The debate highlights the complex trade-offs in using sanctions relief as a tool to manage oil prices amid geopolitical tensions, with questions lingering about its effectiveness and unintended consequences.
