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U.S. senators seek to cut Iran's oil sales in half - again

A security personnel looks on at oil docks at the port of Kalantari in the city of Chabahar, 300km (186 miles) east of the Strait of Hormuz
A security personnel looks on at oil docks at the port of Kalantari in the city of Chabahar, 300km (186 miles) east of the Strait of Hormuz

By Timothy Gardner

WASHINGTON (Reuters) - Fresh U.S. sanctions over Iran's disputed nuclear program being debated behind closed doors in the Senate aim to slash the country's oil sales in half within a year of the plan being signed into law, an influential senator said this week.

Robert Menendez, the chairman of the Senate Foreign Relations Committee, told a meeting of the American Israel Public Affairs Committee (AIPAC) in New York on Monday that a package of sanctions ready to move in his chamber has a goal of cutting Iran's current oil exports to no more than 500,000 barrels per day.

The reduction being sought is about 500,000 bpd less than a more severe bill passed by the House of Representatives in July, which aimed to slash exports to nearly zero.

The Senate bill, which has yet to be introduced by the banking committee, has been widely expected to be weaker than the House bill, which some analysts had said was not realistic.

Since the beginning of 2012, U.S. and European sanctions have already cut Iran's oil exports to about 1 million bpd from about 2.5 million bpd, costing the Islamic Republic crude sales worth billions of dollars a month, and helping to spike inflation and unemployment.

But international talks over Iran's nuclear program have revived after self-described moderate President Hassan Rouhani took office in August in Tehran. Rouhani and President Barack Obama talked by phone in September, the highest level contact between the two countries since 1979.

That has led some to hope that Iran could eventually win some relief from current U.S. sanctions.

Menendez said Iran must freeze and dismantle its nuclear program and demonstrate it is complying before sanctions are lifted.

"This is not the time to loosen sanctions," Menendez told AIPAC, according to a copy of the speech that was seen by Reuters. Menendez said he had told members of the Obama administration he was ready to work with fellow senators to move a new package of sanctions if necessary.

The United States and its allies believe Iran is seeking the capacity to enrich enough uranium for a nuclear weapon. Iran says its nuclear program is strictly for peaceful purposes.

Menendez said the sanctions package would require China, India, South Korea, Turkey and Japan, Iran's remaining oil customers, to further slash their purchases of Iranian crude and other petroleum products.

AVERSION TO CONFLICT

Bob McNally, a White House adviser on energy to former President George W. Bush, Obama's Republican predecessor, said the House bill was seen by many lawmakers as too aggressive.

"The only thing stronger than love for Israel in the Congress is aversion to another military conflict," said McNally. "There is a concern in the Congress about tightening the sanctions so much that it would lead to a conflict."

The plan mentioned by Menendez could still undergo big changes in the banking committee and before being passed by the full Senate, reconciled with the House, and signed into law by Obama.

The Obama administration has pressed the Senate to hold off on introducing new sanctions in order to give the talks a chance.

Secretary of State John Kerry and Secretary of Treasury Jack Lew are set to hold a secret meeting with senators on Thursday about progress of the talks. The United States, China, Russia, Great Britain, France and Germany, the so-called P5+1, are due to hold a second round of talks with Iran in Geneva on Nov 7-8.

(Additional reporting by Patricia Zengerle; Editing by Ros Krasny and Ken Wills)

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