Trump wants to kneel Iran

Donald Trump wants to kneel Iran

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Haro on Iranian oil! US President Donald Trump announced on Monday that no more countries could buy Iranian crude from May 2nd, in order to “zero export” Tehran and “deprive the regime of its main source of income” . In fact, Washington, which had already sanctioned the Iranian oil sector since November 5, decided to end the regime of “exemptions” that still allowed eight countries (China, India, Turkey, Japan, South Korea, Taiwan, Italy and Greece) to import Iranian crude. The US decision on Monday raised crude prices to their highest level of the year, the barrel of Brent reaching $ 74.28.

Director of research at the Institute of International and Strategic Relations (IRIS), where he is a specialist in energy issues, Francis Perrin analyzes in an interview with Point the consequences of the US decision for Iran and the world market.

With the end of the exemptions, are we entering a new phase of pressure on Tehran?

Francis Perrin: This is certainly a new phase, as eight countries have benefited until today from an exemption on Iranian oil purchases: five in Asia (China, India, Japan, South Korea, Taiwan ) and three in Europe (Greece, Italy, Turkey). However, from May 2, there will be none at all.

Can the United States successfully defeat Iran’s exports of crude as they say?

This is far from being achieved, but there will inevitably be a significant decrease in Iranian oil exports. In my opinion, the “0 export” goal is more of a political display. The idea is to put Iran on its knees and hit the key point of oil for the Islamic Republic by reducing its sales as much as possible. But I doubt that no one is buying Iranian oil.

What is the effect of this decision on the Iranian economy?

This new phase is very negative for Iran, which has already seen its exports drop significantly since the withdrawal of Donald Trump from the Iran nuclear deal and the reinstatement of US extraterritorial sanctions. The export volume has gone from 2.5 million barrels a day to about 1.1 million barrels a day today. This is considerable, especially as oil sales account for 60 to 70 percent of Iran’s exports. The impact of sanctions on the Iranian economy, already very important so far, will be strengthened.

Could affected countries refuse to give in to American pressure?

Of the eight countries that benefited from exemptions, there are few that can withstand US extraterritorial sanctions. Taiwan, Japan and South Korea are allies of the United States and it is hard to see these countries say “no” in Washington. The same is true of Greece and Italy. As for Turkey (which has announced that it will continue to trade with Tehran, Ed), the volume of oil it buys from Iran is not significant. So only China and India, as powers, can defy the injunctions of the United States, including Beijing. China is in my opinion a key point.

Could China, a major importer of Iranian oil, not comply with the US decision?

From the Chinese point of view, Iran can be considered as a card in the poker game started with the United States. There are huge interests between the two countries, especially in terms of trade, because Washington taxes $ 250 billion in Chinese exports to the United States, which is worrying for Beijing. In the same way, Chinese companies are very present in the United States. Therefore, if China can afford to say “no” to the US on Iranian oil, it must still consider the threat of US sanctions.

Saudi Arabia and the United Arab Emirates have indicated their desire to offset the decline in Iranian oil in the market. Is it realistic?

This announcement was expected and it is quite logical. Riyadh and Abu Dhabi share with Washington the strategic goal of weakening Iran, which involves sanctions against its oil. These two countries can only appreciate what Donald Trump is doing. On the contrary, they had little taste for the rapprochement that had begun Barack Obama with Iran, which had materialized in the signing of the Iran nuclear deal. Today, Donald Trump is doing a lot to please the Saudis, which deserves a lift from them. In addition, Riyadh and Abu Dhabi have sufficient unused oil capacity to bring large volumes of oil to the market. So there is both a desire to help the United States, and the ability to do so.

There is an increase in the price of oil. Is there a risk of price spikes?

The price of the barrel of brent rose nearly 3% to $ 74, which was inevitable. But there is clearly a will from Washington to limit the damage. The goal is to convince the market that prices will not go up. To do this, the United States has indicated that they will increase their production, which they have been doing for the last ten years with their unconventional energies (shale oil). On this, Donald Trump knows he has the support of American industrialists. Washington also said it has Saudi Arabia and the United Arab Emirates to use their unused production capacity. The US and Saudi oil are the two jewels of the crown so that oil prices do not blaze with the fall of Iranian oil.

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