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Why Is US Unable to Sell Seized Iranian Oil?



Recent events, including the US detention of an Iranian oil tanker in the Persian Gulf and the ensuing standoff off the Texas coast, have brought to light the complexities and effects of the US sanctions policy towards Iran. It becomes clear that the sanctions have not had the expected impact as the US tries to sell the oil it has seized out of concern for Iranian reprisal.


Under the guise of implementing sanctions on Iran, the US Justice Department detained the Greek tanker Suez Rajan in April. The ship, which was carrying 800,000 barrels of Iranian oil, was diverted to Texas from its original destination in China. However, efforts to sell the seized oil have encountered severe obstacles.


Companies who might be able to dump the oil are hesitant to move further because they are worried about Iranian reprisal in the Persian Gulf. US federal prosecutors are having trouble coming up with a solution because of the geopolitical issues surrounding the issue.


The challenges encountered in selling the Iranian oil that was confiscated highlight the unintended repercussions of US sanctions against Iran. While the US intended for these efforts to put economic pressure on Iran, the fact is that Iran frequently responds by raising regional tensions by taking retaliatory measures. US corporations are reluctant to move forward with the oil offloading for fear of Iranian retaliation, exposing a fundamental weakness in the strategy.


This incident is part of a trend of the US-Iranian tanker seizures and confrontations in the past, not a unique incidence. Two million barrels of Iranian oil recovered from a vessel intercepted off the coast of the United Arab Emirates were sold off in 2021 by the Biden administration.


The US confiscated ships transporting Iranian gas headed for Venezuela during the Trump administration, even dumping part of the cargo in New York. These activities have exacerbated tensions and prompted Iran to take retaliatory action, which has had a detrimental effect on regional stability.


The main goals of US sanctions against Iran were to curtail its nuclear ambitions, restrict its regional influence, as well as to address issues with human rights and support for extremist organisations. But these objectives have not been successfully met by the sanctions. As evidence that the sanctions have not stopped Iran from pursuing its strategic goals, the country has instead retaliated by seizing Western ships.


Additionally, despite the restrictions, the Iranian economy has demonstrated amazing resiliency. The country has significantly lessened the impact of the US penalties by diversifying its trading partners and looking for new channels for exporting its oil. As a result, neither Iran's diplomatic isolation nor its ability to conduct foreign trade has been greatly harmed by the sanctions.


The recent episode involving the detention of an Iranian oil tanker by the US serves as a stark reminder of the futility of US sanctions against Iran. The inadequacies of this strategy are highlighted by the inability to sell the seized oil because of concern for Iranian retaliation.


Instead of relying primarily on punitive measures that appear to be counterproductive in achieving their stated goals, the US should think about engaging in constructive diplomacy and multilateral initiatives in order to achieve long-lasting effects.


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