As the Strait of Hormuz, a key oil shipping route, has been closed by the war with Iran and oil prices are soaring worldwide, the U.S. government has decided to temporarily ease sanctions on Iranian oil and supply the barrels to key Asian allies including Korea and Japan. It is a multi-pronged move to quickly stabilize prices while preemptively cutting off Iran's cash flow consolidation with China.
On the 22nd (local time), according to reports by major outlets including Reuters, NBC and Bloomberg, U.S. Treasury Secretary Scott Bessent said in an interview that the administration will temporarily suspend sanctions on 140 million barrels of Iranian oil stuck at sea.
The United States has crafted a strategy to absorb the price shock by quickly boosting the physical supply of crude to the real market, as it did when it eased sanctions on Russian oil in the past. He said, "This oil was originally going to be sold to China at a bargain price," adding, "The strategy is to increase market supply to prevent an extreme scenario in which oil soars to $150 per barrel, and to cut off the revenue Iran could earn from China." Minister Bessent said the Iranian oil under eased sanctions "will be sold to partner countries in Asia such as Korea, Japan and Indonesia."
The United States also holds a firm view that it has ample funding for the war with Iran. Minister Bessent, referring to the additional $200 billion security budget recently requested from Congress, dismissed concerns about tax hikes raised by some, saying, "This is merely a preemptive step to further smooth military supplies going forward; the war chest is already sufficient." He also voiced strong support for President Donald Trump's hard-line warning to Iran that "if the Strait of Hormuz is not opened within 48 hours, Iran's power plants will be destroyed." Regarding the remarks, Minister Bessent said, "At times, paradoxically, tensions must be heightened to de-escalate," adding, "All physical options to neutralize Iran's core military asset are on the table."
Currently, the Strait of Hormuz, a key passage for global crude and liquefied natural gas, is effectively completely blocked after Iran carried out armed provocations. Not only in the United States but worldwide, prices for energy such as oil and natural gas are whipsawing, and inflationary pressure is rising. Minister Bessent said, "There may be short-term pain with a sharp rise in oil prices for about 50 days," but argued, "The fundamental security benefit of ensuring that the Iranian regime can never possess nuclear weapons for the next 50 years is far greater." The logic is to pursue long-term national security and prosperity based on overwhelming deterrence while tightening the squeeze on the Iranian regime's cash flow.
Some criticized the current administration's actions as a serious contradiction for allowing an enemy at full-scale war to openly sell oil to allies and reap huge economic gains. Democratic Sen. Chris Murphy said in an NBC interview that the administration "has completely lost its sense of reality" and is making "fatal misjudgments, as in the Vietnam or Afghanistan wars."
David Tenenbaum, a director at Blackstone Compliance Services, told the BBC that "allowing oil sales in essence helps Iran finance its war," questioning the policy's effectiveness. The Foundation for Defense of Democracies, a U.S. think tank, warned strongly that "there is a very high risk that Iran will pocket billions of dollars in revenue by taking advantage of the sanction reprieve," adding that deregulation without safeguards could lead to strengthened capabilities for pro-Iranian armed groups in the Middle East.