Biden’s choice: Let Iranian oil flow or watch prices rise

Hamas’ attack on Israel is bringing pressure on President Joe Biden to clamp down on Iranian oil exports — even at the risk of provoking a politically damaging spike in world oil prices.

Crude oil exports from Iran have risen on Biden’s watch despite U.S. sanctions aimed at punishing Tehran for its nuclear ambitions, military aggression and support for terrorism. Now, last weekend’s violence by the Iranian-allied Palestinian group is fueling new calls for the U.S. to choke off that revenue stream, which Republican lawmakers have lambasted as an ill-fated attempt at “appeasement.”

The Iranian issue holds politically explosive implications for 2024, representing a stark divide between Biden and former President Donald Trump. The oil exports have also become Exhibit B in the GOP’s complaints about Biden’s handling of Iran since this weekend’s violence in Israel — alongside the administration’s decision to allow Iran access to $6 billion in frozen assets as part of a recent deal to release American prisoners.

The White House has insisted it is still enforcing the economic penalties. “We’ve imposed sanctions on Iran for support to Hamas and other terrorist organizations. That is going to continue — believe me,” said a senior administration official who was granted anonymity to speak to reporters after the attack.

But energy analysts say Iran’s exports have increased four- to five-fold since 2020, with China emerging as its biggest buyer. That increase has come during a time when Biden has sought to ease tensions with Iran, including by trying to revive an Obama-era agreement meant to curb the Iranians’ nuclear weapons program.

Thanks to the oil sales, the Iranians are “making billions of dollars,” former House Speaker Kevin McCarthy (R-Calif.) told reporters Monday at the Capitol. “They’re using that wealth to fund terrorism.”

“Look at what the Biden administration has done to help this Islamic terrorist regime in Iran — by stop enforcing sanctions, by lifting restrictions, by allowing Iranian oil to increase by 650 percent over the last few years,” former Trump national intelligence director John Ratcliffe said on Fox News last weekend.

Some Republicans said Biden needs to go beyond sanctions. Sen. Lindsey Graham (R-S.C.), for example, called on the U.S. and Israel to “hit Iran’s oil economy” in retaliation for the Hamas attack.

“I am urging the Biden administration and the Israelis to jointly come up with a plan to destroy Iran’s oil infrastructure,” Graham said during an interview with a South Carolina television station. “Without oil, they have no money. Without money, terrorism loses its biggest benefactor.”

Ten GOP senators led by Florida’s Rick Scott signed a letter Tuesday urging Biden to join with other G-7 countries to impose “severe sanctions” aimed at Iran.

Some Democrats have joined the calls for a crackdown. “Now is the time to stand with Israel by weakening Iran’s ability to fund terrorism around the globe,” wrote Rep. Jared Moskowitz (D-Fla.), who has co-sponsored legislation aimed at deterring Iranian exports.

The White House did not immediately respond to requests for further comment on these proposals. But Treasury Secretary Janet Yellen said Wednesday in Marrakech, Morocco, that “I wouldn’t take anything off the table in terms of possible future action” against Iran.

However it’s done, removing Iran’s millions of barrels a day would have a significant impact on the global oil market, even though none of the Iranian oil goes to the United States. Iran was the world’s eighth-largest oil producer last year, producing about 3 percent of the global supply — well below the U.S. and Saudi Arabia but just ahead of Brazil and Kuwait.

For that reason, the financial services firm Macquarie Group said in a note to to clients Monday that it doesn’t expect Biden to tighten curbs on Iranian oil shipments.

“In our assessment, the Biden administration’s policy approach has been to limit oil supply disruptions, regardless of the situation,” the firm’s analysts wrote. “Given that policy objectives did not target Russian oil flows even at the height of the Russia-Ukraine conflict, we do not expect Iranian oil exports to be constrained either.”

Worries about rising fuel prices shouldn’t deter the U.S. from cracking down, some lawmakers argued.

“It would be hard for us to come up with an amount of sanctions for Iran that I wouldn’t support,” Rep. Brian Mast (R-Fla.) said in an interview.

As for the risk of oil prices worsening inflation, “We already screwed that deal up,” Rep. Tim Burchett (R-Tenn.) said. “We need to show some leadership.”

House Natural Resources Chair Bruce Westerman (R-Ark.) had an answer for how to stem any price rise: “We need to drill more here,” he told POLITICO on Wednesday.

The Biden administration has said its outreach to Iran is aimed at undoing the damage that Trump inflicted on the 2015 multinational agreement aimed at keeping a lid on Tehran’s ability to produce nuclear weapons.

Trump abrogated the Obama-era nuclear agreement in 2018 — calling the deal “decaying and rotten” even though his administration had certified that Iran was complying with it — and leveled new economic penalties against the country a year later. Those sanctions brought Iran’s oil exports down to about 400,000 barrels a day in 2020, The Wall Street Journal reported last month. (That year also saw depressed oil demand because of the pandemic).

At the time he was ratcheting up the economic punishment, Trump dismissed any worries that choking off Iran’s petroleum spigot would hammer American motorists at the gasoline pump. “Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil,” the then-president wrote on Twitter (now called X) in 2019.

Iran’s sales have since risen to about 2 million barrels a day.

The country’s state shipping company, the National Iranian Tanker Co., told the WSJ last month that the sanctions have posed no obstacles to its oil shipments to China. “Nobody is touching them,” the Journal quoted an unnamed company executive as saying.

Republicans aren’t the only ones calling for tougher enforcement. Sens. Marco Rubio (R-Fla.) and Maggie Hassan (D-N.H.). are leading a bipartisan bill that would penalize anyone who assists Iranian oil exports, and Moskowitz and Rep. Mike Lawler (R-N.Y.) are sponsoring the House companion.

The American Israel Public Affairs Committee urged supporters last week — before the Hamas attack — to pressure lawmakers to act on the legislation. “Urge Congress to cut the cash flow to Iran’s regime,” AIPAC said in a post on X.

Nico Portuondo and Ben Lefebvre contributed to this report.