U.S. Temporarily Lifts Sanctions on Iranian Oil: Potential Economic Impacts

The United States has decided to temporarily lift sanctions on Iranian oil exports. This move comes amid promising negotiations aimed at concluding a nearly four-month war that has disrupted the global energy market. This decision represents a shift away from the previous stance taken by former President Donald Trump. He had imposed stringent sanctions on Iran following his withdrawal from the 2015 Joint Comprehensive Plan of Action (JCPOA) nuclear deal.

Under Trump’s restrictions, Iran’s oil exports were limited to a few buyers, mainly China. Tehran resorted to selling at significant discounts and using complex methods to bypass sanctions. The U.S. Treasury Department’s recent announcement of a new license permits the production, delivery, and sale of Iranian crude oil, petrochemical, and petroleum products until August 2026. This change can significantly reintegrate Iran into the global economy.

According to Brett Erickson, a geopolitics expert with Obsidian Risk Advisors, Iran has the potential to earn between $37.4 million and $51 million daily, translating to about $2.24 billion to $3.06 billion during the 60-day waiver period. He notes, however, that these figures do not imply an entirely new revenue stream. Instead, the waiver increases profitability for Iran by easing the burdens of previously necessary discounts and workarounds.

“The political rhetoric suggests Iran just won the lottery. The reality is far less dramatic,” said Erickson. “Tehran was already selling oil; it just did so while incurring additional costs.”

Behind the Numbers

Erickson calculated several variables to understand changes in Iran’s oil trade resulting from the waiver. Before the U.S. and Israel initiated conflict on February 28, Brent oil was priced at around $66 per barrel. Iran offered its oil at a $10 discount. Now, with the waiver, oil prices are nearing parity, with expected price adjustments post-waiver.

Erickson states that under the previously issued Treasury Department’s General License U, “Iranian oil fetched a $4-$5 premium to Brent.” Similar expectations apply to the new General License X, driven by competitive demand. He expects a $5 per barrel increase in revenue for Iran.

Erickson also considered the realized revenue increase from easing Iran’s shadow fleet operations that previously required expensive tactics to evade sanctions.

“Under normal conditions, Iran ships on shadow fleet tankers with limited insurance and launders proceeds via shell companies through secretive jurisdictions,” Erickson explained. He estimates associated costs were around $7 per barrel, suggesting an $11 per barrel shift in realized revenues.

Erickson estimates that Iran currently manages 180 million barrels of oil, divided among storages across and outside the U.S. blockade, and onshore storage. He projects Iran could raise production to 500,000 export-ready barrels daily. Erickson assumes Iran could sell approximately 201.5 million barrels under the GL-X window, given average journey times, achieving roughly $1.5 billion in additional revenue compared to continued sanctions.

The Long-Term Impact

Erickson advises caution regarding expectations of sustained gains, highlighting potential declines in post-waiver revenues. Even if prolonged for a year, a $10 billion revenue tally would be an upper limit.

Ben Cahill from the Atlantic Council Global Energy Center emphasizes what happens after the waiver. He questions whether Iran can reach buyers beyond China and manage logistics swiftly. Cahill stresses that policy changes could occur depending on peace talks, significantly impacting longer-term outcomes.

He notes the importance of a memorandum of understanding between Trump and Iran’s President Masoud Pezeshkian, indicating potential to end U.S. and U.N. sanctions targeting Iranian oil exports, which would mean further revenue for Iran.

“Should the Treasury license become lasting policy, Iran could experience ongoing revenue benefits instead of a one-time release,” Cahill said. He estimates Iran might gain an additional $35 billion annually over 2025 from standard export volumes, considering historical data, a $70 Brent crude price, and a $5 discount.