U.S. issues Warning against GE and Needle Coke Supplies to Iran

As per the latest updates, the U.S. State Department has issued a sanctions advisory that warns "entities and individuals" of transferring two crucial steel-making inputs, GE and Needle Coke to Iran in its pursuit to deprive Iran of revenue that could be used to promote the "regime's malign behaviour."

The alert issued on 16 Dec'19 says that parties who transfer or export graphite electrodes and needle coke to Iran run the risk of having blocking sanctions imposed on U.S.-based property and assets.

In addition to producers and exporters, parties along the supply chain are also exposed to the sanctions, including port operators, shippers, shipping companies, and vessel operators and owners. The U.S. government alleges the revenue that Iran derives from steelmaking "may be used" for its "proliferation programs, campaigns of regional aggression, and support for terrorist groups."

Tensions have escalated between the United States and Iran since 2018 when President Donald Trump withdrew from Tehran's 2015 nuclear deal with world powers and began a policy of "maximum pressure." The deal offered sanctions relief to Tehran in exchange for Iran curbing its nuclear activities. Since then, Iran has been hit by multiple rounds of economic sanctions.

Iran is world's 10^th largest steel producer with about 85% steel output being produced via electric furnace route, thus having high graphite electrodes requirement. The country is completely dependent upon imports to meet its electrodes requirements with highest supplies coming from India and China. However, after the 2018 sanctions on the country by U.S., Indian suppliers completely stopped their exports to Iran. On the other hand, in case of China although no direct trade is taking place China and Iran, the Chinese suppliers are exporting the same via other countries such as Dubai, Turkey, Oman resulting in circumvention of the sanctions. The country is somehow getting its electrodes supplies as it recorded a surge of 5.3% y-o-y basis in its crude steel output during the first 11 months of 2019 (Jan-Nov). Subsequently, if new warnings coming from U.S. will deter the GE and needle coke exports to Iran from other countries remains to be seen.