LATEST INSIGHTS

Your Present Location :Home > LATEST INSIGHTS

US total ban on Iranian oil exports escalates sanction pressure

2019-05-05

Source: Xinhua    Published: 2019-5-4


The 180-day waivers from Nov. 4 last year for some importers of Iran's oil formally expired on Thursday, announced by the White House before, which ratcheted up impacts of tough pressures on Iran, whose economy was strongly relying on energy sector.


Last May, US President Donald Trump announced that the United States was withdrawing from JCPOA, the Iran Nuclear Deal signed in 2015, which lifted wide-ranging sanctions on the Iranian economy and Tehran in return agreed to accept limits on its nuclear technology program and allow inspections of its nuclear installations.


Following the withdrawal, Trump's administration launched the sanctions on Iran's oil export in November, but leaving eight countries and regions as waivers. They are the biggest buyers of Iran oil.


But a dozen of other nations have entirely stopped buying Iranian crude, shrinking Iranian oil exports by about 1 million barrels per day and depriving the regime of roughly 2.5 billion US dollars in revenue.


Despite the widespread international criticism, the US still insists on its policy that Iran either does a 180-degree turn from its course of action and act like a normal country or it can see its economy crumble.


With time going on, the sanctions on the Islamic Republic from US side are getting tougher. New round of punishing sanctions on Iran's energy, banking and shipping sectors went into force, targeting hundreds of entities, including individuals, banks, aircraft and vessels.


After naming the Islamic Revolution Guards Corps as a "terrorist group" on April 9, offering rewards on information about "money laundry" linked to Iran, the decision of totally blocking the OPEC's third-largest crude producer and the world's seventh-largest oil exporter from the international market is beyond many expectations.


Even if Mike Pompeo, the state secretary of the US, promised on April 22 that US' Middle East allies and other main oil producers would release more production capabilities to fill Iran's absence, oil prices fluctuate worldwide in the past several days and are likely to surge in the near future.


The end of waivers seemed ominously as a bugle-call, but it is still too early to say a new Middle East war is coming. The recent series of actions adopted by the US should be elaborated as the succession of "extreme pressure" by using all measures except war to submit Iran.


But the damages caused by the current sanctions could not meet Trump's expectations. High unemployment, rising inflation and currency weakening have long inflicted Iranian government and its people and got even worse after the imposition of the US sanctions since last year.


Nevertheless, Iran has always kept stable.


"Trump has prioritized three goals as his Middle East policy, involving the annihilation of IS, the solidity of Greenback's dominance in oil trade and containing a rival challenging its hegemony in the region," said Diao Daming, the assistant professor of Renmin University in Beijing.


"All the three goals are far from achievement," Diao said, adding that referring to the expiration of waivers, it is implausible for any company to continue oil transaction with Iran, theoretically, because of their reliance on international banking system, in which the US dollar plays a leading role.


The new round of sanctions has throttled Iran's economy, even before its implementation. The exchange rate of Iranian rial slumped again in this late April and early May.


The European Union, which opposes Trump's unilateral withdrawal from the 2015 Iran nuclear deal, is seeking to preserve the accord and protect the continent's companies from the sanctions.


However, many European firms have cut off ties with Iran rather than risk losing access to the massive US financial and economic systems. Adidas specialty stores, and some other European brands, almost ended up their business in Tehran. Oil market price will a little more than double very soon.


Iranian government has been out of their efforts to obsolete the pressures mounted by the United States. It has tightened the diplomatic relationship with Iraq and Turkey, both who denied sanctions on Iran publicly, promising more economic cooperation conversely, including linking their banks with Iran.


Iranian President Hassan Rouhani noted that his country will keep pushing its oil barrels into the market, downplaying the impact of the US decision to cut Iran's oil exports to zero.


While the United States is busy blocking one path for exports, Iran will still have multiple other methods at its disposal for crude oil sales, of which the Americans are unaware, he pointed out.


Iranian Minister of Petroleum Bijan Namdar Zanganeh also vowed that Iran will exert maximum effort to break the US sanctions. He criticized that the US attempts to wage sanctions as an aggressive economic war against Iran.


Srikanth Kondapalli, professor of Iran's Jawaharlal Nehru University, hailed remarks of Rouhani and Zanganeh, giving suggestion to work out a new oil trading currency system against dollar in a bid to give importers a unified power to be reckoned with by oil producers.


Although current sanction pressure on Iran makes the country face mounting financial isolation and economic stagnation, some analysts saw the country's economic condition will not come into intolerance so quickly.


Lu Jin, an expert in Iran Study from Chinese Academy of Social Sciences, expressed her confidence in Iran, said that US sanctions system would be full of bugs, if Iran's neighbors turned a blind eye on the enforcement.


While the sanctions have piled pressure, Iran is less likely to come into collapse, she added.


Iran is rich in various natural resources and tilled land, which ensure it to survive any sanctions, said Hua Liming, former Chinese ambassador to Iran.


The real challenge for Iran is domestic problems but not America sanctions. Iranians' lives were much more pinched during its war with Iraq than now, but no turmoil, Hua noted, adding that the 1970s is the peak of Iran's development with a big income gap, which the Islamic Revolution followed in the country.


Hua Liming is a senior fellow of Chongyang Institute for Financial Studies at Renmin University of China. Diao Daming is a research fellow of Chongyang Institute for Financial Studies at Renmin University of China.

Key Words: Iran   US   Hua Liming   Diao Daming  

Latest Insights