U.S. Senate Approves Foreign Aid Package with New Sanctions Targeting Iran's Oil Industry

The U.S. Senate has approved a $95 billion foreign aid package that includes new sanctions aimed at reducing Iran's oil trade with China. The sanctions target Chinese banks conducting transactions involving Iranian crude and products, as well as foreign refineries, vessels, and ports that process, transfer, or ship Iranian crude oil in violation of existing sanctions.

The law requires the Biden administration to conduct an annual assessment of Iran's oil exports, which are estimated to be around 1.3-1.6 million barrels per day, with most going to China. However, about 40% of Iranian oil moving to China is considered "effectively unsanctionable" under the existing regime, according to analysts.

The package also includes 180-day waivers that President Biden could use to avert oil price spikes ahead of the November presidential election. Some experts believe these waivers could "nullify the impact" of the sanctions.

In addition to the Iran sanctions, the foreign aid package provides aid for Ukraine, Israel, and Taiwan. It also requires the Chinese-owned parent company of TikTok to sell the company within a year.

Why this matters: The new sanctions on Iran's oil industry could have geopolitical and economic ramifications, potentially impacting global oil prices and U.S.-China relations. The inclusion of presidential waiver authority highlights the delicate balance between pressuring Iran and avoiding domestic economic fallout.

While the sanctions aim to reduce Iran's oil exports, particularly to China, their effectiveness may be limited due to the significant portion of Iranian oil that is considered unsanctionable and the potential use of waivers by the Biden administration. The political calculus surrounding the enforcement of these sanctions could shift if Iran is perceived as renewing aggression toward Israel or continuing its nuclear program.

Key Takeaways

• U.S. Senate approved $95B foreign aid package with new Iran oil sanctions
• Sanctions target Chinese banks, refineries, vessels processing Iranian oil
• 40% of Iranian oil to China considered "unsanctionable" under current regime
• Package includes waivers for Biden to avert oil price spikes before election