- The Washington Times - Monday, April 22, 2019

As global oil prices spiked to a six-month high, China, Turkey and other key international players rebuked the Trump administration’s move Monday to choke off their Iranian fuel imports while experts warned that the escalation of Washington’s economic war against Tehran could spark chaos in energy markets and may backfire politically.

The reaction highlights the political risk the Trump administration is taking and the effectiveness of the squeeze play on Tehran that Mr. Trump and his aides are orchestrating.

The abrupt decision to cancel waivers for five countries still importing Iranian oil, administration officials said, is the most effective tool the U.S. has to starve Iran’s economy, eliminate funding for the country’s nuclear program and, U.S. officials hope, force the nation to cut off its systematic financial support for terrorism. It also signals that Mr. Trump is willing to take ever greater geopolitical risks on other issues — such as deteriorating ties with Turkey, fragile trade talks with China and even South Korea’s help in nuclear talks with North Korea — to tighten the screws on Iran.

The countries affected — including allies such as Japan, South Korea and India and rivals such as China — say the U.S. is being overly aggressive and is trying to impose its political will on the rest of the world.

“The U.S. decision to end sanctions on Iran oil imports will not serve regional peace and stability,” Turkish Foreign Affairs Minister Mevlut Cavusoglu said in a Twitter post. “Turkey rejects unilateral sanctions and impositions on how to conduct relations with neighbors.”

In Beijing, Foreign Ministry spokesman Geng Shuang blasted America’s “unilateral sanctions” and “long-arm jurisdiction” and stressed that its business partnership with Iran “deserves respect.”

But the move was hailed by Israel, where Prime Minister Benjamin Netanyahu has worked closely with Mr. Trump to increase pressure on Iran.

“The decision of President Trump and the American administration is of great importance for increasing the pressure on the Iranian terror regime,” Mr. Netanyahu’s office said Monday. “We stand by the determination of the United States against Iranian aggression, and this is the right way to stop it.”

When Mr. Trump withdrew last year from a multilateral deal to limit Iran’s nuclear program, the U.S. put back into place a crushing set of economic sanctions on Iran. But Washington surprised the markets at the time by granting short-term waivers to eight states — China, India, South Korea, Turkey, Japan, Taiwan, Greece and Italy — that allowed them to continue importing Iranian oil. Those first waivers expire May 2, and Mr. Trump’s aides have been clearly divided over whether to renew them.

Taiwan, Greece and Italy have stopped buying crude from Iran.

The revocation of the waivers is expected to have a major impact on Iran, which gets roughly $50 billion each year — 40% of its annual revenue — from international oil sales.

But analysts warn that the Trump administration risks hardening anti-U.S. sentiment inside the country. Not clear is whether the stated U.S. goal of “zero” Iranian energy exports is realistic.

“This move is both cruel and counterproductive. It’s cruel because it’s obviously going to hurt ordinary Iranians,” Barbara Slavin, director of the Future of Iran Initiative at the Atlantic Council, told reporters on a conference call Monday. “We’re going to see their currency collapse more, more unemployment, more inflation, less investment.

“Counterproductive because it’s not going to bring Iran back to the negotiating table and it’s not going to change Iran’s regional posture significantly,” she said. “It puts the Iranians in a position that they would look extremely weak to give in to U.S. demands on these issues. I’m worried the Iranians will find a way to strike back.”

Indeed, Iran immediately vowed retaliation. Officials in Tehran said they may close the Strait of Hormuz, a major oil shipment route in the region.

“If we are prevented from using it, we will close it,” said Alireza Tangsiri, head of the Islamic Revolutionary Guard Corps naval force, as quoted by the state-run Fars News Agency.

Iranian officials said they have intensified consultations with neighboring countries, as well as “European and international partners,” on the sanctions. The ministry, without elaborating, said a “necessary decision” will be announced later, The Associated Press reported.

Price spike

Administration officials said Iran exports roughly 1 million barrels per day, though analysts say the true figure is about 1.3 million and sometimes approaches 2 million barrels each day.

Clearly concerned about the potential impact on global oil markets, the U.S. coordinated Monday’s announcement with Saudi Arabia and the United Arab Emirates to offer reassurances that the three countries could fill the supply gap when Iranian oil stops flowing.

That did little to calm investors or halt a rapid rise in oil prices, which had been ticking upward even before Monday’s announcement. Brent crude oil prices approached $75 per barrel Monday, the highest since November. West Texas crude futures climbed nearly 3% and ultimately settled at $65.92.

Administration officials played down the market reaction.

“With respect to the impact, the point of this is not to negatively impact other countries,” Brian Hook, the State Department’s special representative for Iran, told reporters Monday. “We are doing everything we can to ensure a well-supplied oil market and that there aren’t any supply interruptions. We have a very well supplied oil market right now.”

U.S. oil production has exploded over the past decade, giving the administration much more leverage on global energy markets. In a fact sheet explaining the move, the State Department stressed that “we have commitments from oil producing countries, including the Kingdom of Saudi Arabia and the United Arab Emirates, to increase oil production to offset reductions in Iranian oil exports.”

While Greece, Italy and Taiwan have ceased importing Iranian fuel, the other five nations continue to be major buyers. In March, China imported about 613,000 barrels per day of Iranian oil, according to Bloomberg figures, and Turkey imported 97,000 barrels a day. South Korea, India and Japan imported 387,000, 258,000 and 108,000 barrels per day, respectively, last month.

It’s unclear whether the affected countries could rush to make orders of Iranian oil before May 2 and escape U.S. economic sanctions.

The White House has made a few exceptions to its hard-line stance on Iran. The administration in March quietly extended the waiver to June for neighboring Iraq, an ally that depends heavily on Iranian natural gas imports to operate its power grid.

Iraqi parliamentary Speaker Mohammed al-Halbusi, on a visit to Washington this year, pushed for a three-year waiver for Baghdad to keep buying Iranian gas. He cited the country’s deep dependency on Iranian supplies.

Some critics say the administration’s tack toward Iran could carry major unintended consequences for oil markets and for the broader world economy.

“In addition to risking a crisis or war with Iran, these actions are also likely to damage U.S. allies in Europe,” said Benjamin H. Friedman, policy director at Defense Priorities, a Washington think tank that advocates a more restrained American foreign policy. “And because the sanctions abuse U.S. financial hegemony, they incentivize alternatives to the U.S.-led global financial system and threaten a major source of America’s economic power.”

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