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Iran Issues Threat as Tensions With West Escalate

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Iran has threatened to escalate its stand-off with the West over the country's nuclear program if the EU follows the European Parliament's recommendation to designate the country's Islamic Revolutionary Guard Corps (IRGC) as a terrorist organization.

The European Parliament overwhelmingly approved a non-binding recommendation last week to add the IRGC to the EU's terrorist blacklist in response to "violent, indiscriminate, disproportionate and unrestrained" suppression of peaceful protests.

Iran's Foreign Minister Hossein Amir Abdollahian said on Sunday that Tehran might withdraw from the non-proliferation treaty on nuclear weapons (NPT) if the EU follows the recommendation, according to state media.

The IRGC is the elite branch of Iran's military that also wields extensive political and economic power and has huge symbolic importance for Tehran.

The EU Council stepped up sanctions against 37 Iranian individuals and entities on Monday, including several branches and senior officials of the IRGC for "their role in the widespread and disproportionate use of force against non-violent protestors."

The UK government took similar steps, announcing sanctions against five officials and the Basij religious militia, an affiliate of the IRGC.

But the EU and UK both stopped short of listing the IRGC as a terrorist organization, as former US President Donald Trump did in 2019.

Trump's move ultimately thwarted the Biden administration's efforts last year to revive the 2015 nuclear deal — the Joint Comprehensive Plan of Action (JCPOA) — from which Trump withdrew the US.

In a move aligned with the EU and UK on Monday, the US sanctioned the IRGC Cooperative Foundation and five of its board members, saying the foundation is an "economic pillar of the IRGC, which funds much of the regime's brutal suppression."

Nuclear Talks 'Not Dead'

Before the latest EU sanctions were announced, the bloc's foreign policy chief Josep Borrell played down the prospect of the EU designating the IRGC as a terrorist organization any time soon, saying that a court decision would be needed first.

But he also acknowledged that it was "obviously difficult" to make any progress in talks to revive the nuclear accord, given Tehran's suppression of protests, execution of prisoners and weapon supplies to Russia.

"I can say that for the moment it's on standby. It's not dead, but it's not moving," he told a press conference after Monday's meeting of EU foreign ministers.

As a signatory to the NPT, Iran has a legal obligation to honor its safeguards agreement with the International Atomic Energy Agency that allows UN inspectors to verify its compliance with the treaty.

Iran's withdrawal could end that cooperation and dramatically escalate tensions around its nuclear program, which UK Foreign Secretary James Cleverly said last week "has never been more advanced."

Oil Sector Uncertainties

The implications for the oil sector of any such escalation remain uncertain.

Current sanctions on Iran have prevented it from selling its oil to virtually all of its former top customers except China. Nevertheless, it has succeeded in hiking its crude exports in recent months to their highest level since 2019.

Meanwhile, the draft budget that Iran's President Ebrahim Raisi submitted to parliament two weeks ago for the upcoming Iranian new year envisages oil exports of 1.4 million barrels per day and an average price of $85/bbl.

Some describe this is an overly optimistic forecast, however.

And besides reducing the likelihood of US sanctions relief, Iran's defiance over its nuclear program could result in fresh US efforts to squeeze its crude sales or pre-emptive action by Israel's new right-wing government that could jeopardize the security of the wider Mideast Gulf's oil exports.

Topics:
Sanctions, Security Risk , Military Conflict, Oil Supply, Oil Tankers
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