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TRUMP'S WAR ON IRAN
The main point of disruption is the US policy against Iran. In May, Trump abandoned US commitments to the 2015 nuclear deal with Iran. He called for a total embargo on Iranian oil exports by November. Iran relies on oil export. In May, as a result of the nuclear deal, Iran's oil exports peaked at 2.7 million barrels a day (mbpd). In February, the Iranian Ministry of Petroleum said the country had hoped to raise this figure to 4.7mbpd in the next four years. But now, it is likely that Iran's oil will be significantly disconnected. This will have catastrophic effects for Iran, certainly, how Trump is about to soar world oil prices but also for the price of oil out of Iran.
Iran had hoped that its Asian buyers would not follow US sanctions. Iranians have put their hopes on China, which buys most of the oil, as well as on India and Turkey. Already, the other two main Iranian buyers – Japan and South Korea – have started cutting back on their oil imports. China said it would not respect the sanctions. It is likely that the so-called petro-yuan will become a lifeline for the Iranian economy. This new oil pricing mechanism remains outside the US dollar institutions and is therefore not so exposed to US pressure. India, vulnerable to US pressure, said it would buy Iranian oil only if it could get a waiver from the US government. Turkey has also indicated that it would like to obtain a waiver, although it is likely that Ankara is also trying to push against the sanctions regime. When Trump was in Europe, he reminded the Europeans of the new American attitude towards Iran. European companies integrated into the US economy will probably not question the sanctions against Iran.
After Trump made his remarks in May, the Russian and French presidents said they would protect their businesses from US sanctions. with the withdrawal of the nuclear agreement. But neither Putin nor Macron have the pulse of their own companies. Total (France) and Severstal (Russia) have already left the business with Iran.
Tehran sees its buyers tighten under the pressure of Trump and the US government. If Iranian oil exports fall to 700,000 barrels a day or even less, its cash will be quickly depleted. Even this amount is only possible if China – which imports 650,000 bpd – resists in the United States. The devaluation of the Rial by the Central Bank of Iran in March and April – before Trump's announcement in May – has already shown the vulnerability of the economy. Fleeing the money economy, the Iranians with money in hand went to the gold coin market, the real estate market and the unofficial foreign exchange markets (a system of Three-level exchange rate is now operational – a precursor to problems. These Iranians are looking somewhere to preserve their endangered value as the danger of economic collapse is facing Iran in the face.
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