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Donald Trump is halting all waivers from US sanctions for countries which continue to buy oil from Iran.
The announcement increases pressure on Iran, which branded the sanctions “illegal”, and primarily affects the five major importers of its oil - China, India and the US treaty allies Japan, South Korea and Turkey.
The US president made the decision as part of his administration’s “maximum pressure” campaign on Iran.
It aims to eliminate all the country’s revenue from oil exports the US says funds destabilising activities throughout the Middle East and beyond.
“This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” the White House said in a statement.
Later on Monday, Mr Trump tweeted: “Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil.”
Announcing the step, secretary of state Mike Pompeo said no more sanctions waivers would be granted when the current batch expire on 2 May, choking off Iranian income that had been more than $50bn (£38.5bn) a year.
“The goal remains simply to deprive the outlaw regime of the funds that it has used to destabilise the Middle East for decades and incentivise Iran to behave like a normal country,” Mr Pompeo told reporters at the State Department.
The administration granted eight waivers when it reimposed sanctions on Iran in November after Mr Trump pulled the US out of the landmark 2015 nuclear deal.
The waivers were issued in part to give those countries more time to find alternate energy sources but also to prevent a shock to global oil markets from the sudden removal of Iranian crude.
Three of those waivers, for Greece, Italy and Taiwan, are no longer needed because the countries have all halted their imports of Iranian oil.
But the other five continue to import Iranian oil and had lobbied for their waivers to be extended.
Nato ally Turkey has made perhaps the most public case for an extension, with senior officials telling their US counterparts that Iranian oil is critical to meeting their country’s energy needs.
They have also made the case that as a neighbour of Iran, Turkey cannot be expected to completely close its economy to Iranian goods.
China, one of Iran’s largest customers, condemned the step, calling it more evidence of US “unilateral sanctions and long-arm jurisdiction”.
Beijing, which relies on imports for about half of its oil, could present the toughest diplomatic challenge for the US in trying to enforce its sanctions.
Those arguments fell on deaf ears within the administration.
“We will no longer grant any exemptions,” Mr Pompeo said. “We are going to zero, we’re going to zero across the board.”
Iran brushed off the decision.
“Regarding the illegal status of the sanctions, the Islamic Republic of Iran basically has not seen and does not see any worth and validity for the waivers,” the foreign ministry said in a statement carried by the official IRNA news agency.
It said Iran has intensified consultations with its “European and international partners” and a “necessary decision” would be announced later.
Mr Trump, defending the move, claimed Iran was being given “very bad advice” by former secretary of state John Kerry, who has previously met Iranian leaders over the scrapped Obama-era nuclear deal.
Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil. Iran is being given VERY BAD advice by @JohnKerry and people who helped him lead the U.S. into the very bad Iran Nuclear Deal. Big violation of Logan Act?
— Donald J. Trump (@realDonaldTrump)
He also claimed Mr Kerry may have violated the Logan Act, an obscure law banning private citizens from negotiating with foreign governments without US permission.
Earlier, Iran reiterated its long-running threat to close the Strait of Hormuz if it is prevented from using the crucial waterway in the Persian Gulf, through which about a third of all oil traded at sea passes.
Left unclear, however, is whether the five countries will face immediate American sanctions if they continue to take delivery of Iranian oil after the waivers expire.
Two senior US officials – special representative for Iran Brian Hook and assistant secretary of state for energy resources Francis Fannon – refused to comment on whether any of them would be given additional time to complete purchases made prior to 2 May or allowed to use money already set aside for purchases after that date without penalty.
Both said questions about such provisions were “hypothetical”, suggesting some accommodation may be possible.
Mr Fannon said the US did not expect any sharp spike in oil prices or any significant reduction in the global supply of oil, given production increases by other countries, including the US itself, Saudi Arabia and the United Arab Emirates.
Those comments were echoed by Kevin Hassett, chairman of the Council of Economic Advisers, although benchmark US crude oil rose 2.4 per cent early Monday after the decision was announced.
Mr Hassett told reporters at the White House he was not concerned the decision will negatively affect oil prices.
He said US production has risen in recent years by “more than all of Iranian production” so there is adequate capacity should there be a need for oil supplies.
He said the link between oil prices and the US economy has diminished as American oil production has increased.
“If the oil price goes up or down $1 a barrel now it doesn’t have that much of an effect ... because our output has increased so much,” Mr Hassett said.
Senator Ted Cruz, who had long lobbied for the step, applauded the end of oil waivers.
“This decision will deprive the ayatollahs of billions of dollars that they would have spent undermining the security of the United States and our allies, building up Iran’s nuclear and ballistic missile programmes and financing global terrorism,” he said.
Israel’s prime minister Benjamin Netanyahu, meanwhile, praised the administration for further tightening sanctions enforcement on Iran, which the Jewish state regards as an existential threat.
He said the move “is of great importance for increasing pressure on the Iranian terrorist regime”.
Saudi Arabian energy minister Khalid Al-Falih said in a statement his country would work with other oil producers “to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance”.
Additional reporting by AP