US, Gulf allies seek to turn economic screws on Iran

US Secretary of State accuses Iran of using its embassies to plot terrorist attacks in Europe.

ABU DHABI — US Secretary of State Mike Pompeo on Tuesday accused Iran of using its embassies to plot terrorist attacks in Europe and warned Tehran that its actions have "a real high cost" after it threatened to disrupt Mideast oil supplies.

Pompeo's comments came during a short trip to the United Arab Emirates, a staunch US ally, and as senior US officials were wrapping up three days of talks in neighbouring Saudi Arabia on countering threats from Iran and starving it of oil revenue.

"Just this past week there were Iranians arrested in Europe who were preparing to conduct a terror plot in Paris, France. We have seen this malign behaviour in Europe," Pompeo said in an interview with Sky News Arabia.

The US team at the talks in Saudi Arabia, led by State Department policy planning director Brian Hook, made a point of focusing on the arrest earlier this month of an Iranian diplomat posted to Vienna who was allegedly involved in the plot to bomb an Iranian opposition group rally in France on June 30, according to a senior US official.

The official was not authorized to discuss the meeting publicly and spoke on condition of anonymity. The envoy's arrest in Germany came after a couple with Iranian roots was stopped in Belgium and authorities reported finding powerful explosives in their car.

Iran denies involvement and contends the allegations against its diplomat are intended to damage its relations with the European Union.

The US official said the administration takes the arrest of the diplomat "very seriously" and sees it as evidence that Iran is using diplomatic compounds in Europe and elsewhere as cover to plot terrorist attacks. The official dismissed Iranian suggestions that it was a "false flag" operation intended to falsely accuse Iran of terrorism.

During Tuesday's visit to the UAE, Pompeo met Abu Dhabi's powerful crown prince, Sheikh Mohammed bin Zayed Al Nahyan, and Foreign Minister Abdullah bin Zayed Al Nahyan.

In interviews, Pompeo stressed the desire of America and its Gulf Arab allies to turn the economic screws on Iran after Trump's withdrawal — in the face of European opposition — from the 2015 agreement that had restricted Tehran's nuclear program in exchange for sanctions relief.

Pompeo said they seek to "deny Iran the financial capacity to continue this bad behaviour" using a broad range of sanctions. He said the sanctions are not aimed at the Iranian people, but at "convincing the Iranian regime that its malign behaviour is unacceptable and has a real high cost for them."

He mentioned recent threats by Iranian President Hassan Rouhani, who in Europe last week said any disruption to Iran's oil exports would result in the whole region's exports being disrupted. A third of all oil traded by sea passes through the Strait of Hormuz off Iran's coast.

Iran "should know that America is committed to keeping sea lines open, keeping the transit of oil available for the entire world," Pompeo told Sky News Arabia, a network half-owned by a member of Abu Dhabi's ruling family. "That's the commitment we have had for decades. We continue under that commitment."

In Tehran, Iran's deputy parliament speaker Ali Motahari praised Rouhani for making the threat.

"The Americans are not ready for any new war in the Persian Gulf so the president's remark was a good threat which will have positive impacts and will be a deterrent factor against cutting Iran's oil exports," Motahari said, according to a report on parliament's website.

Global oil prices have risen on the expectation that the United States will push its allies to stop importing Iranian crude oil, further tightening world energy supplies. While allies like Saudi Arabia, the UAE and Kuwait say they are willing to increase their own production as necessary, additional output may not be enough to satiate demand.

Already, regular gasoline prices in the US are $2.86 a gallon, up from $2.26 the year before, according to AAA. Trump himself has been tweeting that oil suppliers must do more to lower prices ahead of midterm elections this fall.

US benchmark crude traded near $75 a barrel on Tuesday, while Brent crude traded near $80.

While State Department officials earlier acknowledged that some allies will get waivers to continue importing Iranian oil, Pompeo seemed to strike a harder line Tuesday. He warned that such imports largely would be "sanctionable activity and we will enforce those sanctions."

"We will consider (waivers) but make no mistake about it: We are determined to convince the Iranian leadership that this malign behaviour won't be rewarded and that the economic situation in the country will not be permitted to be rectified until such time that they become a more normal nation," he said.

Among the top importers of Iranian oil are China, India, Turkey and South Korea.

Pompeo arrived in Brussels on Tuesday, where he plans meetings on the sidelines of the NATO summit aimed at stepping up pressure on Iran and reassuring allies about alternative oil supplies, a State Department official said.

At NATO, Pompeo would discuss Iran with ministers from Britain, France and Germany, and in other bilateral meetings, said the official, who spoke on condition of anonymity.

He said a meeting with political directors of the so-called E-3 countries of France, Germany and Britain, who signed an international agreement on Iran that the Trump administration has withdrawn from, would now be held in Brussels on Wednesday or Thursday. He said it was postponed for a couple of days due to scheduling issues.

Since Trump's decision to withdraw from the nuclear agreement, European states have been scrambling to ensure Iran gets enough economic benefits to persuade it to maintain the nuclear curbs required in the deal.

But so far it has proven difficult to offset the impact of continued US sanctions, with European firms reluctant to risk far-reaching US financial penalties to do business in Iran.

"No matter how much people write about trans-Atlantic rifts, in the case of Iran we agree on much more than we disagree," the US official said. "The European nations are as frustrated as we are with Iran's missile program, the missile attacks that they are facilitating."