The Trump administration on Tuesday reversed a waiver that allowed the sale of Iranian oil, a key source of government revenue, after the Islamic Revolutionary Guard Corps. attacked three tanks in the Strait of Hormuz.
The Treasury Department said “General License X,” which was issued two weeks ago as part of an interim peace deal between the US and Iran and exempted Iranian oil sales from US sanctions, will be replaced by a smaller waiver called “General License X1.”
The new license does not authorize any sales of Iranian oil after Tuesday. It allows a grace period until July 17 for works already under consideration and approved under a previous license, with proceeds from those sales deposited into a “blocked, interest-bearing account.” It is unclear how many jobs were already underway.
The US was required to issue a waiver of sanctions and allow Iran to export crude oil as part of a 60-day period. US-Iran memorandum of understanding attacked last month. That agreement also extended a ceasefire between the two countries – a condition the US accused Iran of violating on Tuesday by attacking three commercial ships.
“As President Trump and the administration have repeatedly confirmed, the MOU with Iran is fully operational,” a US official told CBS News in a statement after the oil sanctions were lifted. “Iran will only benefit if it shows good behavior. Iran’s actions in the Strait were totally unacceptable to the United States and they will face the consequences. The negotiators continue to work in good faith to reach a final agreement.”
Iran’s Deputy Foreign Minister, Kazem Gharibabadi, criticized the US withdrawal of the resolution, saying it violates the cooperation agreement, in a letter to X.
“Iran, while issuing a serious warning about the consequences of violating the agreement with the United States, will take serious measures to protect national interests and security,” Gharibabadi wrote.
Oil prices rose on the news. The international benchmark for Brent Crude rose to $75 a barrel. The US West Texas Intermediate crude benchmark reached $71.
A spokesman for the Saudi Arabian Embassy in the US condemned Iran’s attack on commercial ships and said it was targeting Saudi and Qatari tankers.
“The Kingdom confirms that this unacceptable attack is an attack on the safety and security of international travel, and on the power supply of energy around the world,” the spokesman said.
The US military’s Central Command said Tuesday hit targets inside Iran in retaliation for commercial shipping strikes, which CENTCOM called “a clear violation of the ceasefire.”
The cessation of attacks on commercial vessels and the withdrawal of the US allowing the sale of Iranian oil were key aspects of the memorandum of understanding signed by the US and Iran on June 18. The memorandum suspended hostilities between the US and Iran for 60 days, while both sides worked to release technical information about Iran’s nuclear program, and required Iran to allow safe passage of commercial vessels.
It also helped cap oil prices, which peaked at $125 a barrel in late April because the Strait of Hormuz, through which one-fifth of the world’s oil passed before the war, was effectively closed. Iranian drone and missile strikes have also severely damaged oil and gas infrastructure in Gulf countries, leading to resource shortages that have driven up prices.
Just before the memorandum was signed, commercial oil reserves were on their way to critical levels. Gasoline prices, which rose above $4.50 a gallon in May, are likely to rise even further.
“The oil wells are running out in about 4 weeks,” President Trump said at a press conference on June 17.
China and India, among the top buyers of Iranian oil, were “big beneficiaries” of the “General License X” sanctions waiver, according to Daniel Tannebaum, former sanctions chief at the Federal Reserve and the Treasury Department.
It is not clear what impact the two weeks of Iranian oil sales – and the increase in oil shipments through the Strait – will have on oil markets.
The broader impact of the US repeal of “General License X” remains to be seen, said Tannebaum, now a partner at Oliver Wyman, where he leads the Global Anti-Financial Crime practice.
“What we know is that the Strait of Hormuz has changed forever now,” he said. “This war set the conditions for Iran to do something that no one really believed they could do, and I don’t know how to put that genie back in the bottle. It’s going to take an incredible job of negotiation to really get back to the kind of free movement that we’ve seen in the Straits for the last five months.”
