US Expands Iran Petroleum Sanctions Authority, Targets 23 Ships in Ghost Fleet

In the wake of Iran's recent attack on Israel, the US on Oct. 11 broadened the scope of its sanctions regime so that it can now sanction any person that operates in the petroleum and petrochemical sectors of the Iranian economy.

The move leverages an executive order issued in 2020 by Donald Trump, which allows the US Treasury Department to single out any sector of the Iranian economy for sanctions. The US Treasury and State departments also used other sanction authorities to designate 23 vessels and 16 entities involved in the ghost fleet that enables Tehran's petroleum trade.

"As long as Iran devotes its energy revenues to funding attacks on our allies, supporting terrorism around the world, and pursuing other destabilizing actions, we will continue to use all the tools at our disposal to hold it accountable," US Secretary of State Anthony Blinken said in an Oct. 11 statement.

The new determination targeting the entire petroleum and petrochemical sector may be a kind of warning, Rachel Ziemba, an advisor with political risk consultancy Horizon Engage, said Oct. 11. "The expansion of scope and new determination suggests the US government is hoping that those involved in this trade will be wary and avoid it, reducing its need to do more," she said.

Tanker sanctions

The tanker sanctions are also a modest expansion of scope because they include those carrying Iranian oil more broadly, not just those thought to be benefiting Iranian proxies like Hamas, Hezbollah, and the Houthi rebels, Ziemba said.

"But it is unlikely to be a real game changer for Iran's oil trade on its own," Ziemba said. The tanker sanctions will likely raise the costs of the trade but, she noted, "any barrels lost would be offset by planned increases from quota-constrained OPEC members in coming months."

Iran's crude export loadings have fallen to well below normal levels as oil markets continued to brace for an expected retaliatory strike by Israel on Iran that could target the country's oil infrastructure and disrupt Middle Eastern oil supplies.

Crude loadings from Iran averaged 816,244 b/d in the week to Oct 9, according to preliminary observed and estimated tanker movements in S&P Global Commodities at Sea. Iran normally ships seven to 10 crude cargoes each week with export flows averaging 1.7 million b/d so far this year, up from 1.1 million b/d in 2022, according to the data.

The new sanctions are "in the spirit of" the Stop Harboring Iranian Petroleum Act, Treasury said in an Oct. 11 statement.

The SHIP Act targets ports and refineries that process illicit Iranian oil, and it was included in the national security package that passed in April. That package also included the Iran-China Energy Sanctions Act, which targets Chinese financial institutions that process transactions involving Iranian oil.

However, the Oct. 11 sanctions do not appear to use those authorities. Lawmakers have urged the Biden administration to speed up implementation of new sanctions measures.

Iran took in US$53 million from petroleum exports in 2023, up from US$16 billion in 2020, according to an Oct. 9 report by the US Energy Information Administration. Iran exported 1.4 million b/d of crude and condensate in 2023, up from 392,000 b/d in 2020, according to the report, which was required by the SHIP Act.

The report is also relevant as Israel considers retaliatory strikes on Iranian oil sites. The data underscores Israel's "revenue case for targeting Iranian oil infrastructure," ClearView Energy said in a note released late Oct. 9. - S&P Global