MR PALLADINO: Welcome, everyone. Thanks for coming. We’re going to start at the top today with our Special Representative for Iran Brian Hook. He has some opening remarks, then he’d be happy to take a few questions from you all. Please, Brian, come on up.
MR HOOK: Hello. Good to see you.
QUESTION: Wonderful to see you.
MR HOOK: Thank you, Matt.
QUESTION: As usual.
MR HOOK: Now that our sanctions on the Iranian regime have been reimposed, we want to alert nations of the risk of doing business with Iran’s shipping sector. If Iranian tankers make calls to your ports or transit through your waterways, this comes at great risk. The United States urges you to consider the advisory we are issuing today.
The sanctions that were reimposed on Monday include sanctions on Iran’s port operators as well as its energy shipping and shipbuilding sectors. We placed on our sanctions list Iran’s national maritime carrier, the Islamic Republic of Iran Shipping Lines, and its oil transport giant, the National Iranian Tanker Company. These sanctions are critical to our maximum pressure campaign. Iran’s energy sector accounts for up to 80 percent of the country’s income from exports. The regime uses this revenue to support its terrorist militias, fund missile proliferation, and sustain its revolutionary exploits that destabilize the Middle East.
We have also reimposed sanctions on the provision of underwriting services, insurance, and re-insurance. Knowingly providing these services to sanctioned Iranian shipping companies will result in the imposition of U.S. sanctions. As Iran’s maritime carriers and vessels are redesignated and lose access to insurance on the international market, they are likely to turn to self-insurance. We suspect they will use Iranian insurance providers such as Kish P&I. Should there be an accident involving an Iranian tanker, there is simply no way these Iranian insurance companies can cover the loss.
This is especially important for Iran’s crude oil tankers, which are usually insured for amounts of $1 billion or more. Oil spills and accidents involving tankers are extremely costly. The immediate costs associated with response and cleanup can range from hundreds of millions of dollars to billions of dollars. When litigation costs and penalties are added, the total liability is even greater. But the costs of these accidents extend well beyond the initial response and cleanup. Tanker spills can imperil fishing and maritime industries for generations, harm tourism, and create irreversible economic and environmental costs on communities and ecosystems.
From the Suez Canal to the Strait of Malacca and all chokepoints in between, Iranian tankers are now a floating liability. Countries, ports, and canal operators, and private firms should know they will be likely responsible for the costs of an accident involving a self-insured Iranian tanker.
We sincerely hope there will be no accidents, but accidents are a very real possibility given Iran’s record. Only 10 months ago in January, an oil tanker managed by the National Iranian Tanker Company collided with a vessel in the East China Sea. The tanker was carrying one million barrels of condensate. The tanker burned for one week and then sank. The collision led to the largest release of condensate ever and caused an oil spill the size of the city of Paris. As the cleanup continues, the liability for this will be in the hundreds of millions of dollars. Iranian insurance companies only covered a small portion of that vessel’s liability. The majority of the tanker’s value is covered by international insurers.
Now that our sanctions are back in place, these international insurers will no longer be in the risky business of covering Iran’s tankers. Self-insured Iranian tankers are a risk to the ports that permit them to dock, the canals that allow them to transit, and the boats that cross their path. This exposes the entire maritime shipping network to immense liability.
If entities continue to do business with Iran’s tankers, they may assume that Iranian insurers can and will absorb the full liability associated with the accident. This is a fantasy. There is little to gain by taking on so much risk for so little return. Just as concerning, entities who allow self-insured Iranian tankers to transit through their canals or dock in their ports may be facilitating Iran’s illicit activity.
Iran has supported the Assad regime in Syria by regularly shipping millions of barrels of Iranian crude to the country. Those entities who permit the transit of Iranian tankers may very well be enabling this activity. I have described very serious liability concerns, but all nations should also be aware of the safety standards and practices of Iran’s oil tankers.
There are increasing reports that Iranian tankers are switching off their AIS transponders at sea. These transponders are safety devices used for collision avoidance and navigation. They enable ships to see other ships and to communicate with coastal authorities. Under international maritime law, vessels have been required since 2004 to use them to broadcast their identity and location. Based on credible data, we now know that up to a dozen Iranian tankers have recently disabled their maritime transponders and have effectively gone dark. We should not be surprised that an outlaw regime also violates basic maritime law.
Turning off these transponders makes tankers harder to track and is a tactic that Iran has used in the past to evade sanctions. In 2012, a majority of vessels in the National Iranian Tanker Company’s fleet turned off their transponders in the run-up to the imposition of U.S. oil-related sanctions. This tactic is a maritime security threat. These transponders are designed to maximize visibility at sea and turning them off only increases risk of accidents and injuries.
Self-insured Iranian tankers engaging in unsafe behavior with many tons of crude oil onboard is courting environmental and financial disaster. Our strong message to any entity considering doing business with these Iranian tankers is to rethink your decision. Protect your port, protect your business, and promote maritime safety.
Happy to take any questions. Matt.
QUESTION: Just on this whole shipping thing, just to be devil’s advocate here for a second, why should people not look at this and say that this is an admission or an acknowledgment that the sanctions are going to make international maritime – international shipping more dangerous?
MR HOOK: Well, the burden is on Iran to make it safe. We’re not the one turning off the – the transponders.
QUESTION: No, but you’re the one sanctioning – you’re the one making it impossible or difficult for them to get insurance, aren’t you?
MR HOOK: I think you’re misplacing the burden of compliance on the United States.
QUESTION: Well, but --
MR HOOK: Iran has tankers. Maritime law requires them to keep their transponders on. They’re turning them off to evade our sanctions.
QUESTION: Okay. And then just one other thing. I wanted to go back to a question I asked you on Friday --
MR HOOK: Yeah.
QUESTION: -- and this is the – it’s going to sound awfully nerdy and technical, but I just want to make sure that – so I asked why Treasury Secretary Mnuchin used the word “jurisdictions” and not “countries,” and I said – suggested it might be because Taiwan would be one of the countries getting an exemption and you said no, I get it, nations. And then the Secretary, when he made his announcement on Monday, included Taiwan as among the eight countries --
MR HOOK: Right.
QUESTION: -- he specifically said. Does this mean that at least the two of you, Brian Hook and Secretary Pompeo, regard Taiwan as a country? Or is this just kind of the slip of the tongue? Have you heard from the Chinese about it?
MR HOOK: No. Our policy has not changed. The United States remains committed to the U.S. “one China” policy, the three joint communiques, and our responsibilities under the Taiwan Relations Act.
QUESTION: So why call it a country and court the ire of the Chinese?
MR HOOK: The SRE that we have granted to Taiwan is relevant to Taiwan’s economy, and anything else you may have heard, whatever you’ve interpreted, nothing has changed on our policy.
QUESTION: Okay, thank you.
MR HOOK: Michele from NPR.
QUESTION: Thanks. Is the – the allotments, the waivers – how much oil are these countries allowed to export during this time? Is there a cap on it? And then also, can you explain how you plan to monitor the escrows in the weeks and months ahead?
MR HOOK: I can’t get into specific volumes because that’s confidential. It’s a bilateral agreement that was reached in each of the SREs. We do --
QUESTION: But there is a cap on each one?
MR HOOK: In order to be eligible for an SRE, a country needs to show a significant reduction. And so we are going to be continuing our path to zero. As you heard the President say today, and I think a couple of days ago, we want – we have been able to take off 1 million barrels from Iran’s exports, and we have actually brought down the price of oil. It was at $74 a barrel when the President announced he was out of the deal; we then took off a million barrels of oil, and Brent is now at 72, roughly 72.
We have been very careful about applying maximum economic pressure without lifting the price of oil, and we’ve done that successfully. I’d just remind you that the Obama administration granted 20 SREs, 20 SREs to 20 countries over a period of many years. We have granted eight. Two of those eight countries have stopped importing Iranian crude. And if you look at all the countries that were importing Iranian crude prior to when the President left the deal in May, 20 of those countries are now at zero. And so 80 percent of this regime’s revenue comes from oil exports. We are very serious about denying Iran the revenue it needs to destabilize the Middle East and fund missile proliferation and all the other malign behaviors it engages in.
QUESTION: Brian, the ship you mentioned that sunk off the East China Sea was among those targeted for sanctions in the announcement that came out Monday. Why was that, and what does that say about the accuracy of that list of 700 entities that you put forward?
MR HOOK: Well, just because a ship is at the bottom of the sea doesn’t mean that it still doesn’t have economic consequences. There’s still payments on the books. And so that ship, just because it sank doesn’t mean that its financial lifecycle has come to an end. And so we’re very serious about going after all of these energy, the way they move their ships, the oil itself. And so that’s why we did that.
QUESTION: Hi. Kurdistan 24.
MR HOOK: Yeah.
QUESTION: The Iraqi prime minister just said that Iraq is not part of the U.S. sanctions against Iran, and it wants a balanced relationship with the U.S. and Iran. What’s your comment on that? And is Iraq in compliance with the sanctions so far?
MR HOOK: Well, Iraq was a – we granted Iraq a waiver to allow it to continue to pay for its electricity imports from Iran. We are confident that this will help Iraq limit electricity shortages in the south. Iraq is a friend and a partner, and we are committed to its stability and prosperity.
QUESTION: And is it in compliance, as far as you know?
MR HOOK: We are very pleased with how we are working with the Iraqis.
QUESTION: Brian, since you don’t – you can’t reveal the details of those exceptions that you’ve made with eight of these countries, can you at least give us some kind of idea as to how much those countries can import from Iran during this time? And also, what level of oil – what level of – what reductions are you seeking from all of these at the end of the six-month period?
MR HOOK: I can’t tell you what our target is. We do have a target.
QUESTION: You do have one?
MR HOOK: Yeah, we do have a target. And --
QUESTION: Is it zero?
MR HOOK: Well, our – yes. I mean, we have a goal to get to zero. As I said, we have an adequately supplied oil market. We have to ensure that we advance our national security objectives while we do not injure our economic interests. If we were to increase the price of oil, it would be bad for American consumers, it would be bad for the global economy, and it would give an advantage to Iran. Now, we foresee in 2019 that we will have more supply than demand, and that puts us in a much better position to bring countries – all countries importing Iranian crude to zero. So that’s our target.
During the next six months, we are going to be monitoring our diplomatic progress and the price of oil to ensure that we have calibrated this the right way.
QUESTION: So --
QUESTION: But, Brian, why don’t you want to give those figures? I mean, if it’s not a transparent – this all feels rather opaque.
MR HOOK: Well, I told you the figure; it’s zero. That is the figure.
QUESTION: It’s never going to go down to zero.
MR HOOK: And so oil is a very fluid market. We have done a very good job of increasing oil production. So we have taken off a million barrels of oil, and during that same period the United States increased production by 1.7 million barrels and we increased exports by a million. The Saudis played a very helpful role, and the Saudi energy minister, Khalid al-Falih, was very good at increasing production during that period. We’ve been very pleased with oil producers increasing their capacity to ensure a well-supplied and stable oil market.
So during this period, while we have taken off a million barrels, we have not lifted the price of oil. And that is not by accident; it is through very careful and calibrated diplomacy led by the Secretary and the President.
QUESTION: So does that mean that some SRE can be renewed after the six-month period?
MR HOOK: We are not looking to grant any exemptions or waivers from our sanctions regime. We have looked at this in terms of we do want to achieve maximum pressure without harming friends or allies, and we do not want to lift the price of oil. So there are a number of variables that go into these things, and we have calibrated them very well so far.
QUESTION: So those variables --
MR HOOK: Abbie?
QUESTION: Have you received assurances from countries like China and India that they are going to go down to zero by the end of six months?
MR HOOK: We have – we have been working with a number of countries and I think that we either have concluded all of our SREs – there are no more than eight, and as I said, two of those have already stopped importing, and the rest we have reached agreement with.
QUESTION: Can you tell us which two have stopped importing?
MR HOOK: I can’t.
QUESTION: To go back to Michelle’s question, Brian. So if you won’t tell us exactly how this is going to work or what number you’re trying to get to, can you talk about your confidence in knowing the money that goes into these bank accounts and the monitoring that the jurisdictions do? As you know, the jurisdictions, the U.S. relies on those jurisdictions to do that monitoring. Turkey was a real problem last time. Why do you have confidence that Turkey will somehow do better than it did before the JCPOA?
MR HOOK: Well, I think you’ve seen a lot of pre-compliance with our sanctions over the last six months. You’ve seen a number – you’ve seen over a hundred corporations announce prior to November that they are leaving the Iranian market or they’re canceling planned investments. On the oil side, we have seen the vast majority of refiners announce that they’re out. I think this is a much different environment with our sanctions. I think the world knows that the President and his Secretary of State are very serious about maximum economic pressure. And that will apply to the escrow accounts. One of the advantages of these SREs is that it denies Iran the revenue from its oil sales. They do not get paid in hard currency. This is a regime that is facing a liquidity crisis. And so now these escrow accounts, even those countries who are still importing Iranian oil, Iran does not get the revenue. They only – it stays in an escrow and then they spend down that amount to import goods from that country that was importing their oil.
The Treasury Department monitors the escrow accounts. Secretary Mnuchin, Under Secretary Mandelker, Marshall Billingsley are very focused on ensuring that these escrow accounts are never used for illicit goods, and we will police these very aggressively.
QUESTION: But as you know, Turkey was subject to criminal action last time for evading sanctions. Do you include Turkey on this list because you have confidence that they’ll do something different or they’ve promised something different, or is this a political decision to include Turkey?
MR HOOK: Well, we have – Turkey is one of the countries. I had very good meetings with my counterparts in Turkey and we are confident that we have reached an understanding in terms of the next six months.
QUESTION: Brian, if we could --
QUESTION: On Turkey?
MR HOOK: Just one more question.
QUESTION: On Turkey? The president of Turkey, I don’t know if you know, he said that, “We will not obey such sanctions.” He announced that he’s not going to follow the sanctions. And he said also that he sees this move by Washington as, quote, “violating the global balance,” end quote. What is your answer on this?
MR HOOK: President Trump received this same question this morning, and I would refer you to his answer.
Thanks very much.
MR PALLADINO: Thanks, Brian.
MR HOOK: Thank you.