Trump Drops The Other Iran Oil Shoe

US SecState Pompeo announced early today that the waivers granted to 8 nations allowing them to continue to import oil from Iran will not bee renewed when they expire in early May.  I am not sure of the identity of three of those nations, but the big five are China, India, Japan, South Korea, and Turkey.  None of them have made any public statement so far, nor has Iran.  It has been announced that Saudi Arabia and the UAE and maybe also Iraq will increase oil production to offset this, nevertheless the price of Brent crude rose about 3 percent today, with WTI close behind.

Supposedly some of Trump’s advisers warned him against this action, presumably putting themselves in danger of being part of the next round of underlings to get fired for being insufficiently subservient.  The situation is potentially aggravated by Trump calling up General Hiftar in Libya and offering support for his drive to take over the whole country. Based in Benghazi, he has moved on Tripoli, reportedly with the encouragement and financial support of the Saudis.  The drive has apparently stalled out, which could lead to production cuts in Libya, although I think the admin people may be betting that Hiftar will win, which might lead to a stabilization of production there.

My guess is that why Trump is doing this now is to provide some distraction from the ongoing discussions of the Mueller Report, with his followers loud proclamations of “no collusion! no obstruction!” appearing not to be convincing anybody not already hooked onto Fox News.  Trump has had considerable success at imposing his will on the world regarding economic sanctions aginst Iran, even as all but a handful of nations strongly disapprove of his removing the US from the Iran nuclear accord, which Iran has continued to follow.  It is a bit absurd that in bragging about the supposed success of their policies, the Trump people have pointed to that as a success, even though supposedly this deal was simply awful.  As it is, their claims this will lead to a new and better deal completely lack credibility.

Indeed, this looks like a potentially much more dangerous situation.  If these major nations obey Trump (I suspect some will not), Iran might be tempted to take more aggressive action, with blocking the Straits of Hormuz among the more serious.  This would really spike the price of oil, and quite possibly trigger a war.  This may be what the Trump people want, with their real policy apparently being “regime change.”  However, so far the only regime change seems to be rising influence of hardliners, with a new hardline commander for the now sanctioned  Revolutionary Guards being appointed.  He has been talking about missiles getting fired on Israel from Lebanon by Hezbollah.  Is this what Netanyahu really wants?

I think those who think the Iranian regime will easily be overthrown are more deluded than those who advocated invading Iraq (and some of them are the same people, see John Bolton especially).  This has the potential of really seriously distracting people from the Mueller Report, but not at all in a good way.

Addendum: I have just seen it pointed out that the key player in how this turns out is the largest customer for Iranian oil, China.  Nobody knows, but some are predicting they will reduce purchases from Iran, but not end them.

Another odd tidbit is that there are rumors on the oil price sites that this might kill the existing OPEC deal, which could end up tanking the oil price from its $60s-70s levels down to $40. Probably not, but this move certainly destabilizes the markets leaving nobody knowing what is going to happen.

Another Addendum:  In WaPo this morning they report that the othet three nations are Greece, Italy, and Taiwan, and that they have already stopped buying Iranian oil under US pressure.  Also, apparently Japan has been stockpiling oil from there ans has stopped further purchases already in anticipation of just this move by the US.   OTOH, both China and Turkey are talking about not obeying the US order.  No word out of either India or South Korea so far.

Bolton says that this is all designed to make Iran be a “normal country,” as if Saudi Arabia were such.  As it is, indeed the hawkish new leader of the Iranian Revolutionary Guards has spoken publicly of possibly blocking the Straits of Hormuz, as I suggested they may well be contemplating.