Economic War on Iran: Trump Sets Sanction Policy for Entire World
Mike Mish Shedlock
Starting November 4, Trump threatens sanctions on any nation or company that trades with Iran.
Effectively, Trump sets sanction policy for the whole world, by proclamation.
Trump's actions constitute an economic declaration of war on Iran. Any country that does not comply with his mandates will also be at war.
Deadline November 4
The U.S. is pressing allies to end all imports of Iranian oil by a Nov. 4 deadline and doesn’t want to offer any extensions or waivers as it follows through on President Donald Trump’s decision to quit the 2015 Iran nuclear deal, a State Department official said.
When Trump announced the U.S. was quitting the nuclear accord he warned that other nations would face sanctions unless they stopped trading with the Islamic Republic. Iran reached the 2015 agreement, which called for it to curb its nuclear program in return for the easing of sanctions, with the U.S., the U.K., France, Germany, China and Russia.
Saudi Arabia has a maximum production capacity of just above 12 million barrels a day, according to the International Energy Agency. If Iran exports drop more than one million barrels a day, Riyadh is likely to have to pump at maximum capacity for the first time since the late 1960s.
“If Saudi Arabia can not offset the loss of Iranian oil, then Washington could always tap into its Strategic Petroleum Reserve. So could China,” said Jan Stuart, an oil economist at consultant Cornerstone Macro LLC in New York.
The Wall Street Journal says U.S. Signals Zero Tolerance on Future Iran Oil Exports
The U.S. expects all countries to cut oil imports from Iran to “zero” by Nov. 4 or risk sanctions, a senior U.S. State Department official said on Tuesday, expressing a toughening of the Trump administration’s Iran policy as Washington tries to politically and economically isolate Tehran.
Buyers of Iranian crude had expected the U.S. would allow them time to reduce their oil imports over a much longer period of time, by issuing sanctions waivers for nations that made significant efforts to cut their purchases.
But the senior State Department official said on Tuesday the administration doesn’t plan to issue any waivers, and would instead be asking other Middle Eastern crude exporters over the coming days to ensure oil supply to global markets.
War it Is
Trump's actions against Iran constitute war. Label it economic war if you want. Moreover, the whole world must comply. Any country that doesn't will find itself at economic war with the US as Trump will sanction them.
Flashback September 26, 2017: Trump’s Top General Says Iran Honoring Nuke Deal.
“The briefings I have received indicate that Iran is adhering to its JCPOA obligations,” Gen. Joseph Dunford wrote in answers to questions in advance of his hearing before the Senate Armed Services Committee, using an acronym for the Joint Comprehensive Plan of Action.
“It makes sense to me that our holding up agreements that we have signed, unless there’s a material breach, would have an impact on others’ willingness to sign agreements,” Dunford said.
Dunford follows Secretary of State Rex Tillerson who said last week that Iran remains in “technical compliance” with the deal, but said the plan has not stopped the threat posed by Tehran.
The other countries that signed the nuclear deal want it to continue, and European ambassadors on Monday reiterated their support for keeping the deal as it is structured. In fact, even if Congress unilaterally re-imposes sanctions on the Iranian oil sector, manyexperts agreethat it would be hard to seriously choke off Iranian oil exports.
On September 25, 2017, "the experts" said Trump Will Be Hard-Pressed to Get Allies to Stop Buying Iran’s Oil.
The Trump administration almost certainly won’t be able to replicate the chokehold Obama placed on the Iranian economy in 2012 by limiting its crude oil exports.
Those sanctions, which reduced Iran’s exports from about 2.5 million barrels a day down to less than 1.5 million barrels a day, were ultimately successful for several different reasons. European and Asian countries supported the U.S. approach, parallel European sanctions had a crippling effect on Iranian exports, and U.S. diplomats coaxed, cajoled, and pleaded with oil-buying countries like China, India, and South Korea and successfully convinced them to limit their purchases of Iranian oil.
Since sanctions were lifted at the beginning of 2016, Iran has clawed back much of its share of the global oil market. By August of this year, it was pumping as as much oil as it had in a year (3.8 million barrels a day) and exporting 2.5 million barrels a day to traditional buyers. Europe is the main destination for Iranian oil, followed by China, India, South Korea, and Japan.
There’s no way to put that genie back in the bottle now, former government officials and energy experts say.
I wonder what the experts are saying today.
Genie Back in Bottle
It does not matter if the whole world thinks Trump's actions are foolish (and they are), they will go along or face sanctions. Effectively, the genie is back in the bottle unless the EU is willing to stand up to Trump.
EU's Blocking Statute
On May 17, 2018, the EU announced a "Blocking Statute" that would allow companies to deal with Iran.
“We will begin the ‘blocking statute’ process, which aims to neutralise the extraterritorial effects of US sanctions in the EU, said European Commission president Jean-Claude Juncker.
The “blocking statute” is a 1996 regulation that prohibits EU companies and courts from complying with foreign sanctions laws and stipulates that no foreign court judgments based on these laws have any effect in the EU.
The European council president, Donald Tusk, added at a meeting of EU leaders: “We agreed unanimously that the EU will stay in the agreement as long as Iran remains fully committed to it. Additionally the commission was given a green light to be ready to act whenever European interests are affected.”
Tusk, who accused Trump’s administration of “capricious assertiveness” earlier in the week, told reporters: “The problem is if your closest friend is unpredictable. It is not a joke now. This is the essence of our problem now with our friends on the other side of the Atlantic. I can agree with President Trump when he said unpredictability can be a very useful tool in politics. But only against enemies and opponents. Unpredictability is the last thing we need with friends and family.”
Not a single EU country or company announced it would deal with Iran. They all fear US sanctions.
As I said, one man now gets to decide sanction policy for the entire world. This is despite the fact, that Iram was actually honoring the deal and the EU wanted the deal to continue.
India an Exception?
On May 29, India, a top Iranian oil importer, announced it Will Not Heed U.S. Sanctions.
It will be interesting to see how long that lasts and what China does, but any companies that deal with the US will all fall in line.
This is the sorry state of global affairs.
Trump managed to undo the one major thing Obama got right and on which our allies agree, and military leaders agree. Nothing good can possibly come from this.
Mike "Mish" Shedlock