The escalation of U.S. sanctions will undoubtedly further deteriorate Iran’s economy and external environment, but it will not force Iran to yield and increase the risk of escalation of confrontation between the two sides.
On April 22, the U.S. government announced that it would no longer grant sanctions exemption for Iranian oil imports to any country or region, which aroused great concern of the international community and the rise in international oil prices.
In fact, this is also a big move by the United States to expand the pressure on Iran’s economy and force Iran to return to the negotiating table
In response, on April 23, Geng Shuang, spokesman for the Chinese Foreign Ministry, said that China firmly opposes the implementation of unilateral sanctions and so-called “long arm jurisdiction” by the United States. China urges the United States to earnestly respect China’s interests and concerns, refrain from wrongdoing that harms China’s interests, and will continue to work to safeguard the legitimate and legitimate rights and interests of its enterprises.
U.S. -Iran Confrontation Upgrade
In May 2018, after the announcement of withdrawal from the Iranian nuclear agreement and the resumption of sanctions against Iran, the United States strongly demanded that all countries stop importing Iranian crude oil. However, when the sanctions came into effect in early November, eight countries and regions were granted 180 days of exemption. Now, the United States decides to completely end the exemption of sanctions against Iran, which will have a new impact on Iran itself, the international oil market and Iran’s crude oil importers.
First, the US containment policy towards Iran has entered a new stage of “blockade”. This time, the formal abolition of exemption by the United States is the continuation and escalation of its comprehensive policy of containing Iran, cutting off Iran’s largest source of income by “liquidating” its oil exports, and forcing Iran to make a choice between changing its policy behavior and economic collapse.
Not long ago, the United States listed Iran’s Islamic Revolutionary Guard as a “terrorist organization”, which shows that the Trump Administration has upgraded its “blockade” of Iran and vowed to carry out its containment policy to the end.
The escalation of U.S. sanctions will undoubtedly further deteriorate Iran’s economy and external environment, but it will not force Iran to yield and increase the risk of escalation of confrontation between the two sides.
Iran’s policy options are limited. At present, the average daily export volume of Iranian crude oil has dropped to about 1 million barrels, which is bound to decline further in the future. Iran strongly condemns the “illegal sanctions” imposed by the United States. On the one hand, it said that it would consult with its partners before deciding how to deal with them. On the other hand, it pledged not to compromise, possibly speeding up the resumption of its nuclear development plan. Iran’s Islamic Revolutionary Guard has once again threatened to close the strategic Strait of Hormuz. Iran’s parliament passed an overwhelming majority on April 23 to list all U.S. troops as “terrorist organizations”.
The escalation of the confrontation between the United States and Iraq may usher in a new round of geopolitical tensions.
Crude Oil Market Meets Major Challenges
Secondly, the U.S. move poses a major challenge to the international crude oil market. As soon as the United States announced the termination of Iran’s oil sanctions exemption, international oil prices rose sharply to a six-month high. Brent crude oil futures rose 3.27% to $74.14 a barrel; West Texas Intermediate Oil (WTI) futures rose 2.67% to $65.71 a barrel; and Shanghai crude oil futures rose 2.85%.
On the one hand, there are new variables in the international crude oil supply. Although the United States has indicated that it will make up for the supply gap with Saudi Arabia, the United Arab Emirates and other oil-producing countries to ensure the supply of global crude oil market, considering the uncertainty of domestic situation and oil production in Venezuela, Libya, Nigeria and other oil-producing countries, the risk of Iran’s crude oil export disruption will bring new pressure to the global oil supply. Stimulated already tense market nerve.
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On the other hand, OPEC’s production reduction agreement is facing new uncertainties. In order to avoid the shortage of oil supply and the rapid rise of oil prices, Saudi Arabia, the United Arab Emirates and other countries may no longer insist on extending the reduction agreement, but withdraw from the reduction action under the cooperation requirements of the United States.
Multinational opposition to the abolition of immunity by the United States
Finally, Iran’s crude oil importers are facing new policy options, and relations with the United States may become tense.
In the list of exemptions announced by the United States, Greece, Italy and Taiwan China have reduced their crude oil imports from Iran to zero, while mainland China, South Korea, India, Japan and Turkey have maintained considerable Iranian crude oil imports.
At present, only about 10 days before the end of the exemption period, it is unlikely that these countries will be required to “clean up” completely, even if it is difficult to ship oil originally scheduled for May out of Iran.
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But if these countries continue to import, they will face retaliation from the United States, and higher oil prices may also put some countries under greater currency depreciation and inflationary pressure. Japan and South Korea, which have been expecting a delay, have expressed concern about the lifting of the exemption from the United States; Turkey has made clear its opposition to unilateral sanctions and will continue to buy Iranian crude oil; India, which relies on Iranian oil, is also eager to find a solution.
Therefore, the policy and response of Iran’s oil importing countries largely determine the effect of sanctions imposed by the United States and Iran’s living environment, while those countries that are difficult to get rid of Iran’s oil importing countries are facing a new round of tension with the United States.
In the short run, it is difficult for the United States to quickly “zero” Iran’s crude oil exports, and Iran will not wait to die, taking counter-measures while seeking new ways to circumvent sanctions. At the same time, uncertainties from the international crude oil market and oil importing countries still exist, and the future development prospects of the event are affected by multi-game.
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