Tehran — Iran has restarted 20% uranium enrichment at its underground Fordow nuclear facility, as ratcheted tensions between Tehran and Washington threaten to further destabilize the oil-rich Middle East.
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"We resumed 20% enrichment, as legislated by our Parliament. IAEA has been duly notified," Iranian foreign minister Javad Zarif said on Twitter. "Our measures are fully reversible upon FULL compliance by all."
Iran's new enrichment level is a further violation of the 2015 nuclear agreement signed with the US, UK, France, China, Russia and Germany. The deal sought to restrict enrichment and uranium stockpiles in order to prohibit Tehran from developing nuclear weapons.
The US withdrew from the so-called Joint Comprehensive Plan of Action in 2018 and reimposed sanctions on Iran, including its energy industry, which has languished under the weight of restrictions on its oil exports.
The announcement of the enrichment resumption comes amid Iranian pressure on US President-elect Joe Biden to return to the 2015 deal and lift sanctions that have crippled the country, while outgoing US President Donald Trump has vowed to maintain his administration's maximum pressure campaign until he leaves office. Biden, who is scheduled to be inaugurated Jan. 20, has indicated he would be willing to return to the 2015 nuclear deal.
"President Trump's response is the biggest wild card, but history indicates he is unlikely to react militarily, absent a direct attack on US personnel or facilities," said Paul Sheldon, Chief Geopolitical Advisor at S&P Global Platts Analytics. "More important for oil markets will be the path of early diplomatic engagement between Iran and the Biden administration, and whether agreement can be reached on limited sanctions relief for some Iranian rollback of recent nuclear advances."
Oil prices did not jump following the announcement, with WTI trading 0.08% higher to $48.56/b and Brent was up 0.56% to $52.09/b at 14:56 GMT.
"The oil market likely doesn't price in any geopolitical risk premium at the moment," said UBS analyst Giovanni Staunovo, "That said, production spare capacity of OPEC and its allies currently is elevated - above 9 [million b/d], that allows the group to react to supply disruptions."
Biden's Iran strategy is likely to flood the market with oil, which is bearish for oil prices, according to analysts. Iranian officials have said Tehran could reverse all steps taken in violation of the 2015 deal if the US fulfills its commitments under the JCPOA.
"Biden's energy policies are targeting oil demand and his administration is willing to negotiate with Iran, which is a political rival to some of the largest producers of the OPEC and directly threatens their national interest and market share," said Sara Vakhshouri, president of SVB Energy International.
Formerly OPEC's second largest crude producer, Iran has seen its output crushed by sanctions to about 2 million b/d in recent months - a 30-year low and half its peak levels from 2008, according to S&P Global Platts' OPEC production survey. It is currently OPEC's fifth largest producer.
The Iranian government has already ordered its oil industry to prepare to ramp up production in anticipation of US sanctions relief under Biden.
But the 20% enrichment level will likely further stoke tensions between the US and Iran.
The US Navy has reversed a decision to withdraw an aircraft carrier from the Persian Gulf and will keep it in the region due to unspecified threats against Trump and other officials, Acting Secretary of Defense Chris Miller said Jan. 3, the one-year anniversary of the US' assassination of key Iranian general Qassem Soleimani on Iraqi soil.
"Due to the recent threats issued by Iranian leaders against President Trump and other US government officials, I have ordered the USS Nimitz to halt its routine redeployment," Miller said. "The USS Nimitz will now remain on station in the US Central Command area of operations. No one should doubt the resolve of the United States of America."
Heightened tension between the two countries nearly led to military action when Tehran downed a US drone in June 2019, a year marked by attacks on oil tankers in the key choke point of Strait of Hormuz in the Persian Gulf.