Fears of unintended consequences as US increases pressure on Iran

Declining Iranian oil exports will deepen Iran’s economic difficulties but that is not likely to force Tehran to scale back its regional ambitions.
Sunday 08/07/2018
A tanker docks at the platform of an Iranian oil facility in the Khark Island. (AFP)
A tanker docks at the platform of an Iranian oil facility in the Khark Island. (AFP)

WASHINGTON - As the US strategy for Iran comes into sharper focus, it is increasingly centred on denying Iran its vital oil revenue and assuring that American consumers have inexpensive petrol.

The United States has chosen an economic route — cutting Iranian oil exports — to achieve its goal of defanging — if not removing — the country’s leadership, although some analysts say a faltering economy will strengthen Iranian hardliners.

“This is a campaign of imposing pressure,” US State Department policy director Brian Hook said. “Pressure is critical to achieve our national security objectives.”

The second goal, keeping oil prices stable, aims to protect US President Donald Trump and his fellow Republicans politically when voters elect a new Congress in November. US petrol prices shot up in May after Trump announced the United States was withdrawing from the Iran nuclear agreement and have held steady since June, the US Energy Information Administration said.

Both US tasks involve the kind of global diplomacy whose inherent difficulty Trump has exacerbated with his itchy Twitter finger and strong-arm foreign relations style. Some analysts say they are mutually exclusive.

“President Trump is trying to have it both ways,” Samantha Gross, a former official in the US Energy Department, wrote in for the Brookings Institution think-tank. “The administration will find that actions that pull crude oil away from a tight market have ramifications at home” with higher fuel prices.

Curtailing Iran’s oil exports requires cooperation from dozens of importers, including putative US allies in Europe that Trump angered with his unilateral withdrawal from the Iran nuclear agreement and his insults of the European Union. If that effort weren’t difficult enough, the Trump administration also must win restraint from rivals, notably China, which is the largest importer of Iranian oil.

US State Department spokeswoman Heather Nauert sidestepped a question about how the Trump administration could sharply curtail Iranian oil exports without China’s cooperation, saying, without giving details: “Well, we have a lot of negotiations and conversations with the Chinese government.”

Avoiding price hikes will require diplomacy by coaxing OPEC countries to increase output. Additional production is needed to offset the expected decline in Iranian oil on the international market and falling production in Venezuela and Libya, whose economies are stymied by political dysfunction.

Trump has sought help from Riyadh, which has among the largest oil reserves in the world and with which Trump has developed close relations, but no amount of goading and tweeting can force US allies such as Saudi Arabia and the United Arab Emirates to produce an additional 2 million barrels a day — the amount experts say is needed to keep prices stable.

Barbara Slavin, director of the Future of Iran Initiative at the Atlantic Council think-tank, said declining Iranian oil exports will deepen Iran’s economic difficulties but that is not likely to force Tehran to scale back its regional ambitions.

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