Since pulling the U.S. out of the nuclear deal, Donald Trump has successfully crippled Tehran’s oil exports, exacerbating an already tenuous economic situation for Iran.
The threat of renewed U.S. sanctions is in large part responsible for the rial’s spiral and since April, things have gotten materially worse. As of early last month, the black market rate was something like 112,000.
Back in June, the State Department said the administration would pressure allies to cut Iranian oil imports to zero (that’s “zero” as in “none”) by November 4. A couple of weeks later, reports suggested Trump was actively considering tapping the Strategic Petroleum Reserve in order to drive down prices at the pump ahead of the November midterms should the renewed sanctions push end up pressuring oil prices higher.
Subsequently, Mike Pompeo and Steve Mnuchin rejected requests from America’s European allies seeking waivers from secondary sanctions imposed on countries who import Iranian crude.
For his trouble, Trump has seen crude prices rise again, with Brent topping $80 last week. That prompted the President to issue yet another call on Twitter for OPEC+ to engineer a selloff, a call they summarily ignored over the weekend. Here’s a chart that documents Trump’s ongoing war of words with an inanimate commodity:
Iran’s crude exports have fallen more than 30% since April, an egregious blow to a country that depends on oil for more than three quarters of its tax revenue.
Trump is expected to deliver a harsh message to Iran at the U.N. this week and will convene a Security Council meeting on Wednesday which will likely revolve around the administration’s stance on the regime in Tehran.
“Despite requests, I have no plans to meet Iranian President Hassan Rouhani”, Trump tweeted on Tuesday morning, adding that he may meet with the Iranian leader “someday in the future.” Trump went to say this about Rouhani:
I am sure he is an absolutely lovely man!
Well, as it turns out, the E.U., China and Russia have now set up an SPV that will allow everyone to simply circumvent Trump’s sanctions on Iran.
On Tuesday, the E.U.’s Federica Mogherini told the UN General Assembly that the vehicle “will allow European companies to trade with Iran in accordance with EU law and could be open to other partners in the world”.
A joint statement from foreign ministers of China, Russia, Germany, the UK and France says the deal is designed to “assist and reassure economic operators pursuing legitimate business with Iran”.
It goes without saying that Trump will see this as anything but “legitimate” and Russia is skeptical about the SPV’s future given that Washington will likely try to undermine it. Here’s what Russia’s director of the department for non-proliferation and arms control Vladimir Yermakov had to say:
Everything that Ms. Mogherini has said is extremely positive. The question is whether this will work, because of course the US will continue to exert colossal pressure on the European Union and, with a strong desire, can easily trample down any mechanism.
Right. Or maybe not. Because this certainly sounds like it’s designed to promote the internationalization of the euro. If that’s indeed the case, it would mean the E.U. has bigger things on its mind than simply preserving the JCPOA.
If the European powers view this as an opportunity to de-dollarize at a time when the U.S. is seen as an increasingly unreliable partner for France and Germany, well then Europe’s resolve might be stronger than Washington anticipates.
And see, this is why seasoned foreign policy experts caution against the inherent dangers of Trump’s adversarial approach to America’s traditional allies. When the President does things like, for instance, characterize Europe as a “foe” and implicitly threaten to pull the U.S. out of NATO, it forces the likes of France and Germany to reassess their strategic relationship with America. That, in turn, leads directly to the types of deals you see manifested on Tuesday in the new SPV described above.
Obviously, Europe and the UK aren’t simply going to do a hard pivot to Moscow and Beijing overnight (especially if the Kremlin keeps poisoning people on foreign soil) just because Americans accidentally elected a political neophyte with the temperament of a small child and the intellectual capacity of a low-functioning adult.
But what they will do is openly flout decisions that threaten international peace and stability, especially if, in doing so, the E.U. sees an opportunity to bolster the international clout of its currency.