US and EU to Impose Additional Sanctions on Iran... Concerns Over Volatile International Oil Prices

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The United States and the European Union (EU) have emphasized that they will soon announce additional sanctions against Iran for its airstrikes on Israel. If additional sanctions on Iranian oil are implemented, it is expected to put upward pressure on oil prices.

According to foreign media including The New York Times (NYT) on the 16th (local time), U.S. Treasury Secretary Janet Yellen stated at the International Monetary Fund (IMF) Spring Meetings that "the United States expects to adopt additional sanctions against Iran within days."

The Biden administration is discussing two main sanction measures against Iran. One is to further restrict Iran's oil exports. Another is to block access to parts needed to manufacture military equipment such as drones. The U.S. is also discussing sanction measures to block the supply of military parts with the Group of Seven (G7: U.S., Japan, UK, Germany, France, Italy, Canada) and plans to seek assistance from unfriendly countries such as China to prevent the escalation of tensions in the Middle East.

Since October 7 last year, when the Palestinian armed faction Hamas attacked Israel, the U.S. has implemented more than 100 sanctions against Iran to weaken terrorist groups indirectly supported by Iran and Iran’s ballistic missile procurement networks.

The EU also indicated an expansion of arms sanctions against Iran. Josep Borrell, the EU High Representative for Foreign Affairs and Security Policy, held an emergency video conference with foreign ministers of the 27 EU countries and said, "Additional sanctions against Iran are inevitable to prevent the crisis from escalating in the Middle East," and that the EU is considering expanding sanctions on Iran’s weapons programs.

The EU has already imposed sanctions on Iran for supplying drones to Russia, which is invading Ukraine. Additional sanctions may be imposed on supplying weapons to proxy militias in the Middle East, such as in Lebanon, Yemen, and Iraq. However, unlike the U.S., the EU appears cautious about measures to block access to parts necessary for Iran’s drone production.

Some voices, as reported by the NYT, express uncertainty about whether additional sanctions on Iran will have a deterrent effect, citing that Iran has spent decades finding ways to evade Western sanctions.

Depending on the level of sanctions imposed by major countries such as the U.S. and the EU, international oil prices could rise. After Iran’s first mainland attack on Israel, the possibility of a full-scale war has eased, and on the same day, the global benchmark Brent crude for June delivery traded slightly down at $90 per barrel.

In the U.S. Congress, legislation related to sanctions on Iranian oil is gaining momentum following Iran’s attack on Israel. On the same day, the Senate passed the "Iran Oil Reserve Prohibition Act (S. 1829)," which sanctions importers and entities dealing with Iranian oil. The House of Representatives approved a separate bill on the 15th that allows comprehensive sanctions on Chinese financial institutions and Iranian banks involved in transactions of Iranian oil and petroleum products.

Energy consulting firm ClearView Energy Partners stated, "If the related sanctions are approved by Congress and implemented, international oil prices could rise by an additional $8.40 per barrel." They added, "Although international oil prices are already on the rise, and politicians might consider delaying the bill, if tensions in the Middle East continue, it may be difficult to withdraw sanctions on Iran."