Trump’s Art of the Deal and Iran sanctions
by M K Bhadrakumar - Indian Punchline
August 4, 2018
An amicable formula seems to be emerging between the Trump administration on the one hand and China and India on the other hand as regards the impending US sanctions on Iran’s oil exports. Below-the-radar consultations are going on between Washington and Beijing and New Delhi.
The Trump administration initially threatened collateral damage to countries such as China and India unless they fell in line with the US diktat to stop all oil imports from Iran to zero by November 4.
Oil is at the core of Trump’s containment strategy against Iran, since oil exports are a major source for income for Tehran and the American game plan is all about hurting Iranian economy until its leadership capitulates and begs him for a meeting.
It’s a hackneyed notion to bully Tehran to make it bend. It never worked in these 40 years – not even under Barack Obama who enjoyed vast political capital in the international community. But the good thing about Trump is that behind the fire and fury, he’s a realist. (By the way, Iranians know it, too, as this utterly fascinating tongue-in-cheek commentary yesterday implies.)
So, after some rounds of diplomacy in world capitals (to test the waters, basically) – Beijing, New Delhi, Ankara, in particular, which are big-time buyers of Iranian oil – Washington began signaling that sanctions can also provide for ‘waivers’ – that is, Trump administration will selectively exercise the great privilege of deciding not to punish countries that may still want to buy Iranian oil after the November 4 cutoff date.
Quite obviously, from the feedback received from American diplomats, Washington senses great reluctance to pay heed to the US demarche.
In particular, China and India (which account for over half of Iranian oil exports) are heavily dependent on Iranian oil – and, for good reason too. At least in the case of India, Iran offers oil at discounted price on deferred payment basis with substantial reduction in freight and insurance costs.
Now, the US cannot possibly sanction the oil industry in China or India because Big Oil is also hoping to do business with them. (For shale oil, Asian market is the preferred destination.) Some analysts predict that Russia, which like America is also an energy superpower, will be a net gainer. Russia can cash in on the needs of China and India for oil; Russia can buy Iranian oil and sell it through swap deals and so on (and make some money in the bargain); or, Russia may even move into the Iranian oil industry in a big way and make investments there. At any rate, it is foolhardy for the US to imagine that it can control the world energy market in terms of price elasticity of supply.
In view of above factors, the Trump administration is finessing an understanding with China and India whereby the US sanctions policy against Iran does not become an acrimonious issue. The interests to be reconciled are: a) China and India have legitimate interests in sourcing Iranian oil and it is unrealistic and counterproductive to coerce them; and, b) US too has an abiding interest not to sanction the oil companies of China and India, which are prospective buyers of US oil.
The Bloomberg report, here, says that China has point blank refused to cut Iranian oil imports but may agree to keep imports at the existing level as of November 4. Interestingly, the report cites US officials heaving a sigh of relief:
“That would ease concerns that China would work to undermine U.S. efforts to isolate the Islamic Republic by purchasing excess oil.”
Plainly put, Washington is relieved that Beijing will not take advantage of the US sanctions against Iran.
On the other hand, the Reuters report on India, here, assesses that Indian imports of Iranian crude oil are dramatically increasing in recent months. A 30% increase is reported in July with crude imports from Iran touching record level of 768000 barrels per day. (This is a whopping 85% jump over the corresponding period in July 2017, which was 415000 bpd)!
Of course, if the US can allow China to keep its import of Iranian oil at existing level as of November 4, it cannot deny a similar formula to India. And, therefore, doesn’t it make eminent sense that India keeps ramping up its oil imports from Iran to the maximum level possible by November 4?
Evidently, this is Trump’s Art of the Deal at work. By the way, for Iran too, this would provide some ‘sanctions relief’. Which in turn may even ‘incentivize’ Tehran to talk to Trump. If there is anything like a workable “win-win” in politics, this is it, this is it.