Iran Wants US to Remove Sanctions before N-Talks to Clear More Crude

A top Iranian foreign ministry official on Feb. 21 said the US needs to remove its sanctions before talks can begin to revive the nuclear deal with world powers at a time when the Islamic Republic is expected to bring as much as 1 million b/d of crude back to the market by the end of this year.

"For us, the criteria is removing the sanctions," Abbas Araghchi, Iran's deputy foreign minister for political affairs, said in a television interview published Feb. 21 by state news agency IRNA. He noted Iran has set a self-imposed Feb. 23 deadline for sanctions to be removed or Tehran will quit additional commitments to the Joint Comprehensive Plan of Action.

Araghchi also said Iran is studying a proposal by EU foreign policy chief Josep Borrell to hold an "informal meeting with the US as a guest." China and Russia are aware, he added. "Principally, we think returning the US to the JCPOA doesn't need negotiations. If they want to return to the JCPOA, it's obvious that they should remove the sanctions," he said.

The Biden administration on Feb. 18 formally offered to restart negotiations with Tehran, inching the two sides closer to a deal that could see the restoration of Iran's approximately 2.6 million b/d export capacity. President Joe Biden has said the US will rejoin the nuclear deal but only after Tehran resumes full compliance with its terms. In 2018, the US under former president Donald Trump dropped out of the JCPOA signed between Iran and global powers, and imposed tighter sanctions on the country.

"I think there is going to be back and forth between the sides in coming weeks/months, but we still think 1 million b/d of additional Iranian oil by year end is more reasonable to assume," Shin Kim, head of supply and production at S&P Global Platts Analytics, said Feb. 21 when asked about Iran's response.

Iranian crude production has climbed steadily since the US election in November. In January, Iran pumped 2.14 million b/d of crude, its highest since November 2019, according to the latest Platts survey of OPEC output. More is likely to come, sources have told Platts, particularly in the run-up to the Iranian new year Nowruz celebrations in late March.

Platts Analytics said the US and Iran could reach a framework agreement to restore the JCPOA as early as in the next one to three months, with Iranian crude supply to grow by 1 million b/d between February and December.

Full sanctions relief may not happen until the fourth quarter, however, assuming Iran would need four months to return its uranium enrichment levels to JCPOA compliance, Platts Analytics said. "Output then grows by 500,000 b/d by June 2022 and 150,000 b/d by end-2022," it said in a recent note.

In early January, Iran confirmed a plan to increase uranium enrichment up to 20% as a counter-measure against US sanctions as Iran used measures foreseen in the JCPOA to scale back restrictions in case of non-compliance of parties with their obligations. Iran's new enrichment level was a further violation of the 2015 nuclear agreement signed with the US, UK, France, China, Russia and Germany. The deal sought to restrict enrichment and uranium stockpiles in order to prohibit Tehran from developing nuclear weapons.

"If they are ready to remove the sanctions in one go, we are ready too to restore all commitments in one go. We will act proportionally," Araghchi said. Lifting sanctions would include allowing crude cargoes to be insured, shipped and paid for without penalty, he said. Iran needs to verify that sanctions removal has materialized before it returns to its commitments in the JCPOA, he said.

"When the oil industry investment sanctions are lifted, there should be a reasonable time until [foreign] companies do their studies and negotiations to conclude a contract," he said. "Important is that there will be no barrier on their way... they should be confident about the place they are going to make investment in. These are issues that will surface and we have to make arrangements to accelerate and facilitate such process. How long it takes for a company to remove its doubts and hesitations is another matter...for example when a European or Asian company wants to come to Iran for an investment or commercial deal without any barrier then we can say it's verified." - Platts