US President Donald Trump signed a memorandum to reinstate his “maximum pressure” campaign on Iran to drive the country’s oil exports down to zero and choke the country's revenue, causing a new rift to potentially open up between the two countries.  

Trump's February 4 diktat stipulates that the return of maximum pressure on Iran was “in the national interest” of the United States. However, in a surprise turn, Trump admitted that he was “torn about” restoring maximum pressure and was “unhappy to do it” but that he had “not so much choice,” an indication that he is open to negotiations with the Iranians.  “We will see whether or not we can arrange or work out a deal with Iran,” he said. 

Iran rolled back much of its nuclear work, including uranium enrichment, beyond the caps set in a 2015 nuclear deal with world powers after Trump walked out of the multilateral agreement in 2018 and unleashed his maximum pressure policy against the Islamic Republic during his first term in office.    

Trump's latest knee-jerk move has caused a blip in global oil markets, pushing prices up by around half a percentage point, while in Iran, the country's currency, the Iranian rial, fell to a record low against the US dollar on the open market, where it was trading for IRR856,500 by 10:00 GMT.

Iran in OPEC

Iran, the third-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), churns out roughly 3.4mn barrels per day (bpd) and aims to pump it up by 400,000 bpd by the end of summer.

Much of Iran’s oil is shipped to China via so-called “ghost fleet”—tankers that switch off their transponders to go unnoticed in order to skirt sanctions.

Trump also ordered the US Attorney General to “pursue all available legal steps to impound illicit Iranian oil cargoes.”

The first round of the maximum pressure campaign was highly effective as it led to a dramatic reduction in Iran’s oil exports, plummeting from 2.2mn bpd to just 200,000 bpd.

However, when Trump’s successor, Joe Biden, took office in 2020, the US government “turned a blind eye” to Iran’s oil sales and they bounced back to about 1.5mn bpd.

China continues to be the largest buyer of Iranian oil despite US sanctions, operating through a yuan-based trading system and intermediaries that circumvent dollar transactions and US regulatory oversight.

"The Trump administration could enforce the 2024 Stop Harboring Iranian Petroleum (SHIP) law to curtail some Iranian barrels," said Kevin Book, an analyst at ClearView Energy, to Reuters on February 5.

The SHIP Act, which saw limited enforcement under Biden, permits action against foreign ports and refineries processing Iranian oil in violation of sanctions. The book noted that Shandong Port Group's recent ban on US-sanctioned tankers demonstrates SHIP's potential impact.

Trump has called for "snapback" sanctions through the UN, referencing the 2015 nuclear deal that his first administration abandoned in 2018. A similar attempt in 2020 was rejected by the Security Council.

Trump meets with Israeli leader

Following the signing of the memorandum, Trump told a joint press conference with Israeli Prime Minister Benjamin Netanyahu that Iran was “essentially broke” and had no money to fund Palestinian resistance group Hamas and Lebanon’s Hezbollah movement when he imposed maximum pressure in 2018.

“I hated to do it then and I hate to do it just as much now,” Trump said, repeating that “I would love to be able to make a great deal… so that it doesn’t end up in a catastrophic situation.”

He warned that Iran could not have a nuclear weapon and it would be very “unfortunate” for the nation to try to make one.

However, Trump noted that if Tehran could convince Washington that its nuclear work was peaceful, which he called an “easy” job, then “they are going to have an unbelievable future.”

Iranian reactions from Tehran

In recent months, the Iranian government has repeatedly expressed willingness to negotiate with the US to reach a deal that could see sanctions lifted. But they have called for “trust-building” measures before any talks.   

Iran's Foreign Minister Abbas Araghchi said on February 5 that US President Donald Trump's sole demand that Iran not pursue nuclear weapons was "achievable", pointing to Iran's commitments under international treaties.

"If the main issue is Iran not pursuing nuclear weapons, this is achievable. Iran is a committed member of the NPT (Non-Proliferation Treaty) and our position on this is completely clear," Araghchi told reporters after a cabinet meeting in Tehran.

Araghchi dismissed the effectiveness of renewed pressure, saying, "Maximum pressure is a failed experiment and trying it again will only lead to another failure."

The Iranian minister also referenced a religious edict by Iran's Supreme Leader that he said prohibits nuclear weapons development, adding that "this clarifies the position for all of us."

Iran’s Minister of Oil, Mohsen Paknejad, on February 5, also lashed out at “unilateral” sanctions, labelling them as a “destabilising factor” in the oil and energy markets and “harmful” to consumers around the world.

“De-politicising the oil market is a vital issue for energy security, particularly for the oil market and its key players,” Paknejad said during a meeting with OPEC Secretary General Haitham al-Ghais in Tehran.