This week, the Senate Foreign Relations Committee voted unanimously that Congress should have the power to approve any final decision on sanctions against Iran.
In a note to clients, RBC Capital Markets wrote that this means it’s going to be a long time before Iranian crude makes its way fully back to the market.
In the wake of the Congressional action, we reiterate our call that Iranian barrels are unlikely to return to the market in any meaningful manner until the back half of 2016. If Congress does in fact reject a final agreement, we believe that the number of barrels that could hit the market in H2 2016 would be capped at around 370 kb/d. Notably, even this represents an optimistic scenario, as it is contingent upon some key international players being willing to risk running afoul of US measures.
A veto from Congress would have global implications, RBC explains, because the current US Congressional sanctions apply globally.
More from the firm:
Despite the modifications, the bill retains the key clause that no Congressional sanctions can be waived if the House and Senate reject the final deal. This is important (as we have pointed out before) because many of the most onerous US measures were imposed by Congress… These measures were explicitly designed to be extra-territorial in reach… This is a key issue for European countries and companies, as officials have already expressed concern about fully reengaging with Iran with only waivers for US measures. Thus, without these waivers, European re-engagement would be highly unlikely in our view. We also believe that certain Asian counties that are currently importing from Iran, particularly South Korea and Japan, would be even more nervous about fully ramping up to pre-sanctions levels without even waivers on Congressional measures. Along those lines, even India, Turkey, and South Africa could have second thoughts in such a scenario.
The short version? Congress is really going to slow down the process of getting Iranian oil back on the market.
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