Trump has his cake and eats it too with sanctions tanking Iran's economy and oil staying low
Michael Gruber/Getty Images; Olivier Douliery-Pool/Getty Images; Samantha Lee/Business Insider
- President Donald Trump's administration is bringing back pre-nuclear deal sanctions on Iran on Monday.
- Trump granted waivers to key countries that can now put money in an escrow account to buy Iranian oil, while Iran won't actually see any of the money.
- Oil prices are steady around $72, Iran is still in the nuclear deal, and its currency and economy have tanked.
- These two results mean Trump is effectively having his cake and eating it too.
President Donald Trump's administration is due to announce the return of pre-nuclear deal sanctions on Iran on Monday, as well as sanctions on 300 additional entities.
The new measures look poised to slam the country's economy while managing to keep oil prices low, and still stopping Tehran from pursuing nuclear weapons.
Trump already brought back a wide swath of sanctions on the country's financial sector in August, after which the rial fell from 45,000 to the dollar to a current rate of 145,000 per dollar. In response, Iran's government restricted its citizens' access to foreign currencies and banking.
But the Trump administration will now hit directly at Iran's lifeblood - its oil industry.
"Iran's oil production is down, its revenues are down, and the country is more isolated than it was" before Trump axed the nuclear deal, Richard N. Haass, President of the Council on Foreign Relations and a former State Department and National Security Council official told The New York Times.
Iran makes noise as businesses pack up and leave
REUTERS/Fars News/Hamed Jafarnejad
REUTERS/Fars News/Hamed Jafarnejad
Iran responded with military drills. Its president, Hassan Rouhani, again offered combative rhetoric.
"We are in the war situation, " Rouhani said of the sanctions, as the Associated Press noted. "We are in the economic war situation. We are confronting a bullying enemy. We have to stand to win."
Iran has already threatened to use its military to hamper Saudi Arabia and other Gulf states moving oil through the Red Sea if the US went through with sanctions.
Rouhani also promised to protect and even grow its economy by beating the sanctions and continuing to sell oil and courting European countries and firms.
But major companies and have already abandoned Iran. Military analysts who spoke to Business Insider did not find Iran's threats of force credible. While Iran has threatened to return to nuclear production, it hasn't signaled serious consideration to exit the nuclear pact.
Additionally, Iran stands accused of attempted assassinations and terror attacks of Iranian dissidents in Europe, further souring the continent against maintaining ties.
"European companies have fled Iran in great numbers. Hundreds of businesses have departed Iran. The whole world understands that these sanctions are real, that they are important," Secretary of State Mike Pompeo told CBS' "Face the Nation" over the weekend.
Oil stable in spite of sanctions
Trump's administration calls its Iran policy "maximum pressure." Nonetheless it granted waivers to eight of Iran's top oil buyers, but in such a way that Iran won't actually see hard currency from it.
The waivers only allow Iran's top oil clients - China, India, South Korea, Japan and Turkey - to put money in an arm's-length escrow account in exchange for Tehran's oil. Only once the US drops the sanctions can Iran take possession of the cash.
The move looks to have prevented a sharp spike in oil prices, which hovered just about $70 per barrel on Monday. Trump has repeatedly leaned on Saudi Arabia to help keep the prices down.
By granting the waivers, Trump seems to have both massively isolated Iran but also kept oil prices affordable - achieving two aims at once.
Trump's withdrawal from the deal has massively isolated Iran and tanked its economy. But if Iran leaves, the slim benefit it now sees from the nuclear deal will quickly collapse to zero.
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