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 InsiderPresident Donald Trump and Iranian President Hassan Rouhani.
  • President Donald Trump’s administration is reintroducing sanctions on Iran on Monday.
  • Trump granted waivers to key countries that can now buy Iranian oil by putting money in an escrow account, which Iran won’t be able to access until sanctions are removed.
  • Oil prices are steady at about $US73, Iran is still in the nuclear deal, and its currency and economy have tanked.
  • These 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 Iranian economy while still managing to keep oil prices low, all while 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 now plans to hit directly at Iran’s lifeblood: its oil industry.


Read more: Iranian intelligence reportedly used Google to crack a CIA communications system, leading to ‘dozens’ of deaths

“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, the president of the Council on Foreign Relations who previously served as a State Department and National Security Council official, told The New York Times.

Iran makes noise as businesses pack up and leave

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 responding to sanctions by using its military to hamper Saudi Arabia and other Gulf states moving oil through the Red Sea.

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.


Read more: Pompeo calls on Iran, Saudi Arabia to stop regional struggle with ceasefire in war-ravaged Yemen

But major companies and have already abandoned Iran. Military analysts who spoke with Business Insider did not find Iran’s threats of force credible. While Iran has threatened to return to nuclear production, it hasn’t signalled serious consideration to exit the nuclear pact.

Trump Game of Thrones posterTwitter/RealDonaldTrumpTrump posted this image to Twitter on Friday ahead of harsher restrictions on Iran.

Additionally, Iran stands accused of attempted assassinations and terrorist attacks of Iranian dissidents in Europe, further souring the continent against maintaining ties.

“European companies have fled Iran in great numbers,” US Secretary of State Mike Pompeo told CBS’ “Face the Nation” over the weekend. “Hundreds of businesses have departed Iran. The whole world understands that these sanctions are real, that they are important.

Oil stable in spite of sanctions

Oil priceMarkets InsiderThe price of Brent crude oil on Monday, when the sanctions were to take effect.

Trump’s administration calls its Iran policy “maximum pressure.” It granted waivers to eight of Iran’s top oil buyers but did so in such a way that Iran won’t actually see hard currency from it as long as the sanctions are in place.

The waivers only allow Iran’s top oil clients – including China, India, South Korea, Japan, and Turkey – to put money in an arm’s-length escrow account in exchange for Tehran’s oil. Only when 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 at about $US73 a barrel on Monday after sloping down from a high in October of just under $US90. 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 while still keeping oil affordable – achieving two aims at once.

Trump’s withdrawal from the deal has isolated Iran and tanked its economy. But if Iran leaves the nuclear pact, the slim benefit it now sees from the nuclear deal will quickly collapse to zero.

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