News Analysis |
A senior official of U.S State department put an ultimatum to the oil importers to halt their petroleum imports coming from Iran by November 4. He went on to state that failure to do so will result in sanctions upon countries and multinational companies, barring them to do business inside the United States of America.
If China and Russia continue to provide Iran with high-grade military hardware, then the move is not going to be much effective.
The announcement was particularly a shocker for countries like India and China which traditionally used to get a waiver from such measures as the official hinted that Trump administration is in the mood to provide guarantees this time around. The Tuesday’s announcement comes on the line of the strict policy which United States administration under the directive of President Donald Trump has taken. Last month United States announced that it will no longer be the party to Joint Comprehensive Plan of Action (JCPOA) or Iran nuclear deal.
In the past, countries like India, China, and Russia never really stopped the trade with Iran even before 2015 agreement when the whole world was bound to comply with the embargo. It gave the essentially required lifeline to Iran’s economy which saved it from going bankrupt but it was still not enough. Experts believe that these countries especially China and India will manage to find their way out of these restrictions once again as they are the United States’ largest trade partners.
Trump administration is already tangled in a tariff row with China and placing further sanctions for doing business with Iran will ultimately come to bite U.S economy itself. On the other hand, India will have to work things out more elaborately as both Iran and United States are its strategic and trade partners.
Donald Trump seems to be in no mood of giving Iran any air of relief. European diplomats had been involved in off the record rounds of negotiations with a representative of State department, Brian hook, to reach a solution before the U.S decided to quit the deal. In April, President Emmanuel Macron of France told Mr. Trump in the Oval Office that negotiations with Mr. Hook were about to yield a strong agreement. “Who’s Brian Hook?” Mr. Trump responded, according to a person with knowledge of the exchange.
It is also believed that timing of this announcement could possibly be an indicator of the message which Trump administration wants to send before the Vienna conference where remaining signatories of JCPOA will be convening next week. European signatories of the deal have been trying to work out a solution for the deal to still sustain without the U.S being part of it. The reason France and Germany are so desperately trying to save the deal has more to do with their own vested economic interest than nuclear proliferation.
After the deal was signed back in 2015, European multinational companies found Iran to be a viable market with high anticipated return on investment. After the U.S decided to quit from the agreement, companies like Total were anticipating wavier to do business inside Iran. But the projects and capital investment is now in jeopardy with the U.S showing no intention to provide anyone with relief.
The success of these sanctions upon any country is highly dependent upon the compliance of military suppliers with them. If China and Russia continue to provide Iran with high-grade military hardware, then the move is not going to be much effective. And since both these countries have decided to go one step ahead and fill in the economic gap once European companies move out, the efficiency of the move is likely to reduce further.
Furthermore, the global oil market is expected to face a rise in the per barrel price of oil if Iran is taken out of the equation. With oil supply considerably down due to unrest in countries like Venezuela and Libya, Iran’s exclusion will reduce the market cap even more and experts believe that price rising as high as $100 per barrel by the end of this year will not be surprising.