US will not renew Iran oil exceptions
On 22 April 2019, the US Secretary of State Mike Pompeo announced, somewhat surprisingly, that the US will not renew any of the existing Significant Reduction Exceptions ("SRE"s) that were issued for eight countries on 3 November 2018. The decision aims to "bring Iran’s oil exports to zero", according to the White House, and underscores the US determination to expand and enforce its maximum pressure against Iran.
The result is that the sanctions provisions under the National Defence Authorization Act ("NDAA") may be fully enforced after 2 May 2019. The NDAA, mainly targeting foreign financial institutions ("FFI"s), was enacted in December 2011 to reduce Iran's global oil trade. As SREs have been issued for consecutive 180-day periods ever since then, the NDAA has however not been fully enforced, see this article from Steptoe & Johnson LLP. According to Steptoe & Johnson, no sanctions have been imposed under the NDAA to this date.
With this week's announcement, this might change. If so, full enforcement of the NDAA will require the President to, inter alia, shut out from the US financial system (correspondent or payable-through accounts) any FFI that is determined to engage in financial transactions for the sale or purchase of petroleum products to or from Iran or in significant transactions with Iranian banks.
It is possible that the US will delay the full imposition of the NDAA provisions by use of other exemption grounds. Mr. Pompeo, however, stated that "we intend to enforce the sanctions". President Trump underlined in the White House press release that his administration "is determined to expand and enforce its maximum pressure campaign against the Iranian regime".
According to the President, the US will together with Saudi Arabia and the United Arab Emirates work to ensure that the global oil markets will be well supplied, without Iranian oil.
The current SREs were issued to the major Iranian trading partners China, Greece, India, Italy, Japan, South Korea, Turkey and Taiwan.
Find a video of Mr. Pompeo's announcements here and the White House press release here. For further background information on the NDAA, SREs and the possible cascading effects of this week's decision also for non-oil Iranian trade, we recommend this article from Steptoe & Johnson LLP