The permit issued by the US Treasury Department applies to Iranian oil loaded onto ships from last Friday until April 19.
In a statement on X, Treasury Secretary Scott Bessent writes that this will “release 140 million barrels of oil” to the global market and thereby ease price pressure.
Met with criticism
However, the announcement has been met with criticism from several quarters. Democrat Don Beyer writes on X that "Not even a clown's performance is an accurate description of the decision" and that it is a financial gift to Iran in connection with the war. Thina Margrethe Saltvedt is of the same opinion:
It's getting strange, on the one hand they're trying to attack facilities in Iran to slow down the war fund, on the other hand they're going to allow the sale of Iranian oil.
Traditionally, China in particular is a major customer of Iranian oil and the country has been able to buy the oil at a discounted price thanks to other countries' sanctions against Iran.
The volumes are limited, so the revenue won't be very large, but it clearly generates revenue and it can help fill the war chest.
According to Scott Bessent, the decision will mean that countries such as India, Japan and Malaysia could become potential buyers. Thina Margrethe Saltvedt believes that India could be a potential buyer. However, she considers it unlikely that it will cause the oil price to fall significantly from the current level of around $110 a barrel.
This does not have much significance for the oil price and the market itself in the long term.
Obvious consequences
The current oil price is the highest since 2022, having surged from around $65 a barrel before the outbreak of the Iran war. The economic consequences have become apparent, with airlines canceling flights due to rising costs and, in Vietnam for example, governments urging people to work from home to reduce consumption.
If we go back to 2011–2014, the oil price was above $100 a barrel or at least around there. The economy can handle those levels for a period, but that means lower growth than we would otherwise have had. The world economy is coping, but it will enter a slower pace than what would otherwise have happened, she says.
