US trying to shut down remaining inflows of oxygen to Iran's economy

US trying to shut down remaining inflows of oxygen to Iran's economy

BAKU, Azerbaijan, Oct.21

By Azer Ahmadbayli – Trend:

After the attacks on the Saudi oil infrastructure on September 14 and the subsequent reaction of the White House, it became completely clear that economic pressure on Iran will remain a predominant option over the use of force.

During his UN speech, President Trump promised that sanctions on Iran will be strengthened even more.

In its latest World Economic Outlook, the International Monetary Fund (IMF) said that Iran's economy will contract by a massive 9.5 percent this year, its worst performance since 1984 when the Islamic Republic was at war with Iraq.

However, Iran still has several windows of oxygen inflow to its economy, which is struggling to stay afloat. Washington’s immediate aim is to close them down. This particularly applies to Iran's main trading partners, especially those importing oil and gas, the country's main source of revenue.

During the first six months (March 21-Sept. 22) of the current Iranian year (began March 21, 2019), China, Iraq, Turkey, the UAE and Afghanistan were the top five destinations for export of Iranian goods, according to the report of the Iranian Customs Administration, Mehr news agency reported.

Within the reported period, Iran exported products worth $5.1 billion to China, $4.6 billion worth of goods to Iraq, $2.5 billion - to Turkey, $2.3 billion - to the UAE and just over $1 billion to Afghanistan.

China is the biggest remaining buyer of Iranian oil, so, the US is trying hard to disrupt this stream.

On September 25, the US decided to impose sanctions against several Chinese companies as they transported oil from Iran, violating the US ban.

Despite this, global ship tracking data shows that some Chinese shipping companies have likely continued to transport Iranian oil in circumvention of sanctions by shutting off automatic identification system (AIS) on their vessels, which made them too hard to track.

However, for the time being, all the Trump administration can do is to “warn shipping companies, energy companies and port officials to be wary of trade in Iranian oil, in some cases telling them they could face sanctions for doing so,” says Reuters.

Iraq is perhaps the most problematic country for Washington's plans to strangle Iran’s economy.

Iran, with a share of 24 percent, ranks first in imports to Iraq, according to Iran's trade attaché in Iraq Nasir Behzad. According to him, Iran is followed by China (20 percent), Turkey (19.5 percent) and the US (10 percent).

Currently, Iraq's viability is largely dependent on supplies of natural gas and electricity from Iran, which provides 38-40 million cubic meters of gas and 1.2 thousand megawatts of electricity for Iraq on a daily basis.

The US had to extend sanctions waivers for Iraq on energy supplies from Iran several times, as the cessation of supplies threatens to quickly destabilize the situation. Pro-Iranian forces in Iraq will not hesitate to take advantage of such a gift, blaming the US, and organizing massive civil unrests.

On June 15, the US once again extended a 90-day permit for Iraq to import Iranian gas and electricity. The exemption period was increased to 120 days. It should be noted that Iran is not only Iraq's leading trade partner, but it also has a strong religious and political influence in this Arab country.

The US administration is aware that breaking the Iraq-Iran trade ties by ending sanctions waivers is not yet possible, and drastic steps to do so could have unpredictable consequences, both for Baghdad as well as for the more than 5,000 US troops stationed in Iraq.

How is the dynamics of trade between Iran and Turkey changing?

Based on the latest data from the Turkish Trade Ministry, obtained by Trend, in August 2019, Turkey's trade turnover with Iran fell by $465.2 million, compared to August 2018, and reached $258.4 million.

From January through August 2019, trade turnover between Turkey and Iran decreased by over $2.2 billion, compared to the same period of 2018, having amounted to over $4.4 billion.

Iran has always been one of the major exporters of oil and gas for the resource-poor Turkey, but this year, especially after May 2, when the US ended exemptions from oil sanctions for a number of countries, a sharp decline in Iran’s supplies can be observed.

From May through July, Turkey imported 410,000 tons of crude oil from Iran against just over 2 million tons in the same period of 2018, i.e. five-fold decrease. (*Latest data by Turkish Energy Regulator available only through July).

As for the UAE, the statistics show that Iran's trade with this country exceeded $11 billion during the last Iranian year (March 21, 2018 – March 20, 2019).

A new political approach of Iran and the United Arab Emirates to reduce tension and preserve region's security should increase the trade volume in the current Iranian year (began on March 21, 2019), although it is necessary to see for how long the positive trend will last, Masoud Taheri Mehr, a representative of Iran's Trade Promotion Organization, believes.

So, as it can be seen, the sanctions have mostly showed their worth in trade between Iran and Turkey (this may be a temporary success for Washington). The rest of Tehran's main trading partners, for various reasons, are not going to abandon trade with the Islamic Republic, pursuing their own interests, just like the US itself.

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