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As part of the preliminary agreement between the U.S. and Iran, President Trump demanded that the Strait of Hormuz be reopened. That was a win ahead of midterm elections, tempering the spike in gas prices. But Iran walked away with the biggest prize - the lifting of sanctions on its oil sales. NPR's international affairs correspondent Jackie Northam has this report.
JACKIE NORTHAM, BYLINE: For the better part of 30 years, Iran's oil exports - a key driver of its economy - have been under punitive sanctions. They were briefly lifted in 2015 as part of the Obama nuclear deal, only to be reinstated in 2018 by Trump. Lifting the sanctions was a primary demand by Tehran during recent peace negotiations. Mohammad Darwazah is a senior strategist for Energy Aspects, a market intelligence firm. He says he was surprised how quickly the U.S. gave in and issued sweeping waivers on the oil sanctions for the next 60 days.
MOHAMMAD DARWAZAH: There is no trust between both sides. So in many ways, for the Iranians to get this as the first step is quite significant.
NORTHAM: Darwazah says the waivers go beyond the production and sale of crude oil. They include petrochemicals and other petroleum products. Transactions can be made in U.S. dollars. Vessels, shipping and insurance companies involved with Iranian oil are also no longer under U.S. sanctions. Darwazah says it's estimated the regime could pull in between 8 and $10 billion under the agreement, which can be renewed by mutual consent when it expires on August 21.
DARWAZAH: This would be a win for its new leadership. It's a win for the Revolutionary Guard, which obviously control a lot of these entities. So yes - absolutely - this is a win for them.
NORTHAM: During the recent G7 summit in France, Trump defended the interim agreement with Iran, making it clear he signed it in a bid to get oil moving through the Strait of Hormuz again.
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PRESIDENT DONALD TRUMP: I didn't want to see economic catastrophe. If you kept this going, that could have happened.
NORTHAM: There's been pushback by Iran hawks that the regime will use money from oil sales to build up its military and proxies in the region. Bob McNally, president of Rapidan Energy Group, says Trump knew he had to give in to Iran's foremost demand and grant sanctions relief on Iran's oil exports.
BOB MCNALLY: This is a ransom payment for oil. That's what it is. Iran took Hormuz hostage, and we had to pay Iran to release the hostage.
NORTHAM: There's been an initial rush of Iranian oil through the Strait of Hormuz. McNally says Iran has the capacity to move roughly 2 million barrels a day. That's about 2% of the world market.
MCNALLY: So it's not a big deal in terms of the global oil market. But in terms of what really moves the needle for the global oil market is if we can keep Hormuz open.
NORTHAM: Open so other sources of crude from Saudi Arabia, Iraq and others can get through without fear of an Iranian attack. Much of Iran's crude is heading to Asia, says Jim Burkhard, head of crude oil research at S&P Global. He says Iran had long mastered the art of moving its crude using shadow fleets - old tankers that often turned off their transponders to avoid detection.
JIM BURKHARD: Iran isn't going to have to use the same mechanisms they used before to try and hide the sales or obfuscate the sales.
NORTHAM: And, Burkhard says, probably for a better price.
BURKHARD: Iran before had one customer - Chinese refineries - and they had to sell at a discount to get around all the sanctions. So that discount is probably going to diminish, maybe not right away.
NORTHAM: Burkhard says buyers may still be a bit leery, since the U.S. and Iran keep trading blows, putting the deal in further jeopardy.
Jackie Northam, NPR News.
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