The United States has a clear interest in punishing and deterring Iranian aggression throughout the Middle East, most of which targets US allies in the region. The administration of US President Donald Trump also wants to impose controls on Tehran over its nuclear work, tougher than those it negotiated during the administration of former President Barack Obama. Economic sanctions provide a non-military means to this end, and past experience shows that they are, to some extent, effective. The danger is that it can provoke Iran, make it resume large-scale uranium enrichment, or make it an attack on Americans. This requires a US military response, and perhaps escalates into another war in the Middle East, a war that President Trump has vowed to avoid.
Test
Trump tested this trend last year when he re-imposed oil sanctions on Iran, with the exception of some of its biggest clients. The result, according to the administration, was Iran's loss of $ 10 billion in oil revenues, which amounted to $ 50 billion, which in turn reduced funding for the Iranian-backed Hezbollah. Despite its threats, Tehran did not dare cross the red lines drawn by the US administration.
The US administration has taken advantage of this negativity to double sanctions on Iran to eliminate its remaining oil exports by threatening buyers, including China, India, Turkey, South Korea and Japan, with sanctions if it does not comply with its instructions. China, which buys half of the remaining oil from Iran's markets, may defy US pressure, but if the administration succeeds, the Iranian economy, already struggling to stand on its own feet, will be hit hard. Trump is essentially betting that the Iranian regime will swallow the punishment again, instead of testing the administration's determination.
Swallowing punishment
Iranian leader Ali Khamenei may choose this trend because he knows that the strong opposition from European governments to Trump's policy, as well as his Republican opposition, may encourage Iran to be patient for 18 months in the hope that he will not be re-elected. But if Iran responds strongly, Trump may be forced to choose between turning a blind eye to its bad behavior, which put an end to the Obama administration's 2015 nuclear deal or slip into a war that most Americans do not want.
One of the reasons for the possible confrontation is that the US administration left Tehran with little options. US Secretary of State Mike Pompeo reiterated yesterday the administration's openness to negotiations with Iran, but set out a list of dozens of conditions the Iranian regime must fulfill, Its current foreign policy. These steps, ranging from halting the development of nuclear-capable missiles to ending hostility toward Israel, are desirable, but unrealistic in the absence of a broader settlement with Iran's regional adversaries.
The real goal
The real aim of the administration may be the collapse of the regime. Pompeo said the administration's demands "resemble what we hear from the Iranian people themselves." "We will not please the oppressors of the Iranian people," he said. This may also be a welcome outcome if US sanctions are capable of achieving them. But history does not offer many encouraging examples, raising the question of whether Trump carefully studied the difficult angles that his policy might lead to.
In the heat of these confrontations, Asia's major economies seek to find new oil sources after the United States has decided not to grant exemptions from sanctions on Iranian oil. The Trump administration has granted exemptions to China, Japan, India, South Korea and Taiwan, as well as Italy, Greece and Turkey.
The exemptions are due to expire on May 2. China is the largest importer of Iranian oil in the world, and India is among the most affected countries. Asia consumes large amounts of oil compared to any other region, consuming more than 35% of world demand. Some countries that have already granted exemptions have found alternative sources. Italy, Greece and Taiwan have not bought any Iranian oil since November, according to the International Energy Agency, and China, India and South Korea are still buying from Iran. India, for example, seems to have a plan to replace Iran's oil market with another market.
Warning
The US administration has warned that all countries that continue to import Iranian oil will be subject to US sanctions. The threat appeared not to be met by a reaction from some of the countries concerned. Beijing criticized the administration's warning that it "opposes unilateral sanctions." South Korean officials have told the media that they are struggling to comply with US sanctions, but the country's refineries are specifically designed to handle Iranian crude oil. "Turkey rejects unilateral sanctions on how to manage relations with neighbors," Turkish Foreign Minister Mouloud Zhaoshoglu said on Twitter.
"Economic sanctions from the United States could hurt the flow of trade, the ability to access global financial markets, and financial and economic dealings," said JPMill's investment manager, Russ Mould. Earlier this month, a $ 1.1 billion fine was imposed on Standard Chartered Bank for allegedly repeatedly violating sanctions against Iran and other countries. Huawei, a US telecommunications group operating in the United States, has been accused of violating sanctions against Iran.
The United States says sanctions will continue until Iran stops "seeking nuclear weapons." This US campaign against Iran fuels growing concerns about supply in the oil market, as Venezuelan oil shipments have already been reduced by US sanctions as violence hits Libya, one of the most important producers in the group of oil producers and exporters.
The process of replacing Iran's crude will leave little room for producers to deal with future supply shocks. "The problem is that oil-producing countries will end up with very little spare capacity for any other emergency or oil market crisis," says an oil market expert.
While it is still too early to predict the price of oil for $ 100, US crude prices are set to reach a level of $ 70 a barrel if concerns about the lack of supply in world oil markets remain prevalent. High oil prices could further affect economic growth in China and India. With many energy-dependent sectors, the domino effect is likely to compound the economic problems of Asian countries already experiencing a slowdown.
One of the reasons for the possible confrontation is that the US administration left Tehran little choice. US Secretary of State Mike Pompeo reiterated the administration's openness to negotiations with Iran, but set out a list of dozens of conditions that the Iranian regime must fulfill, which fully reflects its current foreign policy.
China, which buys half of the remaining oil from Iran's markets, may defy US pressure, but if the administration succeeds, the Iranian economy, already struggling to stand on its own feet, will be hit hard.