The nuclear deal signed on Sunday will not allow any more Iranian oil into the market, or let western energy investors into the country, but it does freeze U.S. plans for deeper cuts to Iranian crude exports, Washington says.
Iran and six world powers reached a breakthrough deal early on Sunday to curb Tehran's nuclear program in exchange for limited sanctions relief.
But U.S. and EU sanctions on Iran's energy sector, which have prevented western energy companies from dealing with Tehran, and slashed its oil exports from 2.5 million barrels per day (bpd) to around 1 million bpd, will remain in place.
“In the next six months, Iran's crude oil sales cannot increase,” a fact sheet
posted by the White House on the U.S. State Department's website on Sunday said.
“Under this first step, the EU crude oil ban will remain in effect and Iran will be held to approximately 1 million bpd in sales, resulting in continuing lost sales worth an additional $4 billion per month, every month, going forward.”
Western pressure on Iran's mainly Asian oil customers
to find other suppliers has supported global oil prices over the last two years. Rising U.S. and Saudi production has helped dampen the impact of around 1.5 million barrels per day of Iranian oil being shut out.
U.S. lawmakers had planned further cuts in Iran's oil exports but Washington has pledged not to impose new nuclear-related sanctions over the next six months, so long as Iran sticks to its side of the deal.
Less crude from Iran would increase pressure on regional rival Saudi Arabia to squeeze more out of oilfields that have already been pumping at record levels this year.
Benchmark Brent crude hit a six-week high of $111.40 on Friday on early uncertainty over whether an agreement over Iran's nuclear program would be reached.
Brent eased late on Friday on renewed hopes that the long-awaited deal would be struck, closing the week on $111.05 a barrel. Oil markets are closed on Sunday.
The White House estimates that Iran has lost more than $80 billion since the beginning of 2012 because of lost oil sales. It also estimates Tehran's earnings over the next six months will be $30 billion down compared with a six-month period of 2011, before sanctions were imposed.
U.S. sanctions effectively bar Iran from repatriating earnings from oil exports, forcing customers to pay into a bank in their country.
Washington estimates that Iran has around $100 billion in foreign exchange earnings trapped in such accounts.
Under the terms of the deal, Iran will be allowed access to $4.2 billion of oil export revenues. But nearly $15 billion will still flow into accounts overseas over the next six months, according to the U.S. government.
“We expect the balance of Iran's money in restricted accounts overseas will actually increase, not decrease, under the terms of this deal,” the White House fact sheet said.
The U.S. government has also suspended some restrictions on gold and precious metals trade and lifted sanctions on Iran's petrochemical exports that were imposed earlier this year.
Other energy sanctions
Iran is home to some of the world's largest oil and gas reserves but U.S. energy firms have been barred by Washington from Iran for nearly two decades.
Several European oil and gas companies had planned multi-billion dollar investments over the last decade to help develop Iranian reserves.
However, U.S. pressure drove European energy companies away from Iran in the late 2000s, for fear of jeopardizing their interests in the U.S. market if they stayed.
Western companies, whose technology Tehran needs to fully exploit its oil and gas riches, are keen to go back into Iran when sanctions are lifted.
Despite the landmark deal struck on Sunday, U.S. restrictions on trade, including those banning long-term investment or provision of technical services to Iran's energy sector, are still in place.
Sanctions preventing the sale of petroleum products to Iran, which needs to import such fuels because it lacks refining capacity, also remain in effect.
Potential buyers of Iranian crude have found it difficult to insure their multi-million dollar shipments, because of wide-ranging restrictions on providing financial services for Iranian trade.
The White House fact sheet says that financial sector sanctions remain intact, along with those affecting Iranian shipping companies.
However, a senior western official said on Sunday that relief on EU sanctions on oil shipping insurance was included in the deal.
The EU could relax insurance restrictions without causing a rebound in Iranian oil exports by only allowing customers to insure their current volume of oil purchases and no more. It is unclear how the EU would police this.