Temporary Lifting of U.S. Sanctions on Iranian Oil

The United States has temporarily lifted sanctions against Iranian oil exports, signaling progress in ending a four-month war impacting the global energy market.

President Donald Trump’s administration traditionally restricted Iranian trade through sanctions since withdrawing from the 2015 Joint Comprehensive Plan of Action (JCPOA) nuclear deal in 2018. These restrictions compelled Iran to sell oil mainly to select buyers like China, often at steep discounts due to limited export options.

The U.S. Treasury Department has announced a license authorizing Iranian-origin crude oil production, delivery, and sale through August 21, 2026. This could significantly enhance Iran’s connectivity to the global economy.

Brett Erickson, geopolitical expert and managing principal of Obsidian Risk Advisors, emphasizes Iran’s potential earnings under this new license. He calculates that Iran could earn $37.4 million to $51 million daily, or about $2.24 billion to $3.06 billion during the 60-day waiver period, assuming full oil sales.

“Tehran was already selling oil; it was simply paying a sanctions tax in the form of discounts, shadow shipping, and financial laundering costs.”

Erickson argues the temporary waiver doesn’t create a new revenue stream but makes an existing one far more profitable.

Behind the Numbers

Erickson evaluated several variables to understand anticipated shifts in Iran’s oil trade. Prior to the war initiated by the U.S. and Israel on February 28, Brent oil prices were around $66 per barrel. Iran sold oil at approximately a $10 per barrel discount. Currently, Iran sells at near-parity, mitigating any expected declines from prolonged sanctions after the waiver period.

Under General License U, Iranian oil fetched a $4-$5/barrel premium to Brent. Erickson expects similar rates under General License X due to purchaser pool competition increasing demand.

Erickson highlights additional realized revenue stemming from easing Iran’s complex network of shadow fleets previously needed to evade sanctions, involving murky costs from shipping, loopholes, and third-party payments. Reasonable costs to circumvent these are estimated at $7/barrel. Thus, Iran enjoys an $11/barrel revenue shift.

Iran’s current access totals around 180 million barrels of oil, divided between 95 million outside the blockade line, 25 million inside, and 60 million in onshore storage. With production scaled to around 2.3 million barrels daily, and just 200,000 barrels available for export under blockade measures, Iran now ramps up to 500,000 export-ready barrels daily.

Erickson calculates Iran’s capacity to sell 201.5 million barrels under the 60-day General License X if every barrel is sold, equivalent to 3.36 million barrels per day.

If Iran sells at a rate of 2.3 million barrels per day, benefiting from an $11/barrel revenue increment, potential earnings could increase by $1.5 billion more than under sanctions.

The Long-Term Impact

Despite immediate gains, Erickson cautions against assuming perpetual benefits.

“Let’s assume they sell literally every barrel…what are their revenues going to look like the next month?” Erickson queries.

Production won’t reach pre-war levels, risking significant reductions.

Even extended waivers won’t substantially boost long-term earnings beyond $10 billion yearly, Erickson suggests.

Ben Cahill of the Atlantic Council Global Energy Center believes the post-waiver period holds more importance.

“Buyers outside China have a green light to buy Iranian oil and pay in U.S. dollars, but it takes time to arrange deals, financing, and all logistical details.”

The memorandum signed last Thursday by Trump and Iranian President Masoud Pezeshkian includes U.S. commitments toward ending sanctions on Iranian oil exports. If the Treasury license becomes permanent policy, Iran could benefit significantly.

Cahill estimates annual revenue increases of $35 billion under 2025 volumes if the waiver becomes lasting. These estimates estimate average export volumes from 2015-2017, a $70 per barrel Brent crude price, with a persistent $5 per barrel discount.