Trump succeeds in punishing Iran without spiking oil prices — for now

Comment by Jim Campbell

November 3rd, 2018

It is not at all clear to me why the U.S. is still allowing oil to be shipped by Iran to any country.

 

 

Current Iran leadership cannot be trusted and future likelihood under the current administration doesn’t look likely.

Go for a complete boycott, If Iran starts acting up, turn the country into dust using conventional weapons.

Iran continues to supply munitions and fighters who oppose U.S. Coalition Troopers in the Middle East and Africa.

Light them up

 

The Saudi Oil Minister agrees that production is down but other nations are picking up the slack.  (Source)     After allowing some countries to buy Iranian oil, the Trump administration appears on track to attain the president’s dual policy goals of punishing Tehran with sanctions while also keeping oil prices in check. Secretary of State Mike Pompeo announced Friday morning that the administration will dole out exemptions to eight countries allowing them to continue importing oil from Iran even as the U.S. applies sanctions on Tehran beginning Sunday night. The waivers reflect the unease the Trump administration felt at the prospect of higher oil and gas prices during voting season. Yet sanctions experts and oil market practitioners don’t expect the waivers to be lenient enough to save Iran’s economy, which is highly dependent on oil exports. Pompeo said the administration would name the countries to be granted waivers Monday, but they are expected to include China, which buys the most oil from Iran, India — the second largest buyer — South Korea, Japan, Turkey, and others. Waivers last 180 days under U.S. law. The sanctions these countries are exempted from are intended to punish nations that buy oil from Iran, after President Trump rejected the nuclear deal with Tehran in May, by cutting them off from the U.S. financial system. While Trump’s own national security adviser John Bolton, and other hawks, have argued the exemptions weaken leverage over Tehran, oil market observers say the administration is simply recognizing the implausibility, and price risks, of blocking the world from Iranian oil. Iran is the third-largest producer of the oil cartel OPEC, providing more than 2 percent of global oil output. “The president gets it now,” said Richard Nephew, a senior research scholar at Columbia University’s Center on Global Energy Policy who directed sanctions policy at the State Department in the Obama administration. “Providing exemptions to sanctions is a common-sense victory,” Nephew told the Washington Examiner. “Stopping purchases from Iran was never going to happen.” Nephew and others say granting the exemptions is not a signal of surrender. Pompeo on Friday emphasized that each of the exempted countries are making “important moves” to transition to zero imports of Iranian oil, as a condition of being granted more time to do so. He said he expects two of the eight countries to eventually cease buying oil from Iran, and the six others to reduce purchases by “greatly reduced levels” in a matter of “weeks.” “This is really not a waiver, but an extension of a deadline with the understanding everyone is going to zero,” said Joseph McMonigle, president of the Abraham Group, a consulting firm, and a former chief of staff of the Energy Department in the George W. Bush administration. “Every country may not do it. But they are on the hook,” McMonigle told the Washington Examiner. McMonigle and others contrasted the Trump effort with that of the Obama administration. Before reaching the Iran nuclear deal, the Obama administration granted exemptions to 20 countries over three years for similar oil sanctions on Tehran. During those sanctions, the Obama administration expected nations to cut imports by about 20 percent during each 180-day review period to get a subsequent exemption. The Trump administration, by contrast, has said it seeks reductions greater than 20 percent every six months. Pompeo said he expects Iran’s oil exports to fall a total of 1 million barrels per day even before the imposition of sanctions Nov. 5.   Please read the entire article below.   “These guys beat Obama by two to one [in reducing oil exports from Iran] through October, and could go deeper in November,” Kevin Book, managing director of research at ClearView Energy, told the Washington Examiner. “You can call that a softening if you want, but it’s sure something. It’d be silly to say Iran is not feeling this.” Critics, however, said the administration giving exemptions because of fears over an oil price spike proves that U.S. foreign policy remains beholden to global energy supply, even as America has become a leading producer of oil from the shale boom. “The decision to grant Iranian oil import waivers to eight countries is just the latest example of how America’s dependence on oil continues to restrict U.S. foreign policy options,” said Robbie Diamond, president and CEO of Securing America’s Future Energy, which advocates for policies to wean the U.S. off using oil. Trump has leaned on Saudi Arabia, OPEC’s de facto leader and largest producer, and its Gulf allies to increase oil production to offset lost supply from his impending sanctions on Iran. His pressure campaign seemed to work. Brent, the global benchmark oil price, was at its lowest level since mid-August this week, on the back of more production from OPEC and the U.S.’ own massive output. That comes after prices had breached $85 per barrel last month because of expectations that the Trump administration would impose an aggressive sanctions policy on Iran’s oil. “Our laser-focused approach is succeeding in keeping prices stable,” Pompeo said. “Not only is this good for American consumers and the world economy, it also ensures that Iran is not able to increase its revenue from oil as its exports plummet.” But oil market experts expect the price to rise after the midterms if the Trump administration successfully negotiates with most of the exempted countries to stop importing from Iran. “The falling price is potentially a temporary phenomenon if they still try to drive Iran to zero oil exports next year,” Nephew said. “There just isn’t enough oil. If you take another million off the market, you are going into spare capacity, and it will have a real impact on prices.” This summer, the International Energy Agency warned that the world’s excess oil supply — spare capacity — may be “stretched to the limit” because of output disruptions from major producers, including Iran. There are other complications, too. Even if Iran’s oil exports fall even more, Saudi Arabia and its Gulf allies could be dissuaded from providing more output if the U.S. imposes sanctions on the Saudis over the killing of journalist Jamal Khashoggi. “After the election, the Saudis and other Gulf producers will their take foot off the pedal on the production boost,” McMonigle said. “The lower oil prices won’t last.”       THE END