Blinded by Trump’s whim, US sanctions on Iran may send developing economies in a tailspin

The second wave of US sanctions on Iran has started and it will hit its oil exports, shipping and banks—all considered as key parts of the Middle-East country’s economy. This apart, the US Treasury and the Department of State have placed over 700 Iranian firms and individuals in the sections list. The stated aim of US sanctions is to cripple Iran’s missile and nuclear programme and hit its economy hard so that it may lose its political, diplomatic and strategic weight in the Middle-East region. Eight countries, including India, Japan and China, have been temporarily granted a waiver from US sanctions on their import of oil from Iran. That means after a few months, specifically six months from November 5 when the second phase of US sanctions on Iran began--those countries which have been currently granted the waiver will face the music if they continue to have a business with Tehran.

This is certainly a dictate that no sovereign country will accept. India has already stated in the public that it abides by sanctions imposed by the United Nations and not those imposed by any another country. India, the second largest Iranian oil buyer after China, imports more than 17 per cent of crude oil from Iran. The US asks it to restrict its monthly purchase to 1.25 million tonnes or 15 million tonnes a year from 22.6 million tonnes bought in the 2017-18 financial year. Given the circumstance when global oil price is increasing and national currency against US dollar has weakened substantially, India has no intention to abide by the US dictates to bring oil import from Iran to zero level even after May 2019. Even China, which is already not sharing good relations with the US on the trade and commerce front, will do what suits its economic, political and strategic interests.

Read | US issued strongest sanctions on Iran ever: Donald Trump

In fact, the ongoing geopolitical situation across the world and current global economic realities show that the Trump administration will have to realise that its move to withdraw from the 2015 Iran nuclear deal and impose sanctions on the country will prove futile. A broad hint in this regard has already been given by Europe too as it has set up a mechanism to rescue Iran from the stifling economic sanctions. Under a proposed measure known as a special purpose vehicle (SPV), Europe will help persuade Tehran to stay inside the deal and not break it even at the face of provocations from the US. Major European powers like France, Germany and England which were part of P5+1 that had signed the deal with Iran on the nuclear issue in 2015, have opposed the US’ unilateral decision on Iran. They have, in many words and innuendoes, made it clear that the decision to withdraw from the Iranian nuclear deal is based on President Donald Trump’s subjective beliefs and perception and not on facts, logic or larger public interests.

Read | Dharmendra Pradhan gives credit to PM Modi after US allows India, seven nations to buy Iran oil

There is a fear that America’s move to bring Tehran under sanctions’ regime will further escalate oil prices. The US itself is not equipped enough to fill demand and supply gap that cut in Iranian oil supply will cause. Nor is the combined strength of Saudi Arabia, Libya, the UAE, Angola and Nigeria—all major Organisation of Petroleum Exporting Countries (OPEC)--able to match loss caused by cut in supply of oil from Iran and Venezuela, the Latin American nation which is mired in protected economic crisis and continues to lose oil production. The ongoing trade war between China and the US is hitting below the belt already stressed economy of the world. In this situation, what disruptions American sanctions on Iran will cause in the oil market, especially 180-day after exemptions granted to eight countries—India, China, Japan, South Korea, Italy, Greece, Taiwan and Turkey, expires. Analysts predict a more economic downturn in 2019. They say the rise in oil prices could slow down demand in the market. American leadership seems to be unflustered with international concern.  Donald Trump blinded by his ego, in fact, is bent on pulling the world, especially developing economies into the well of distress and misery.