President Donald Trump said the United States "will take care" of countries that continue to buy Iranian oil after the second round of U.S. sanctions kick in on November 4 this year. Trump made the comment speaking to reporters in Washington, days after India said it will buy 9 million barrels of crude from Iran and Reuters reported a VLCC carrying Iranian crude had offloaded it in bonded storage at the Chinese port of Dalian.
The Economic Times reports that Indian Petroleum Minister Dharmendra Pradhan had told media that India had its own energy needs to satisfy, which reaffirms the message sent by New Delhi to Washington earlier this year: although the two may be allies, they sometimes have different priorities. India is facing popular unrest because of rising inflation, and one of its causes is more expensive oil.
The country is Iran's second-biggest crude oil buyer, with Iranian crude accounting for almost a tenth of India's total oil imports in financial 2017/2018.
China, for its part, has made it clear on numerous occasions it has no intention of cutting Iranian imports of crude oil. Despite media reports that it has been taking less Iranian crude, it seems this was a temporary situation as the trade row between Beijing and Washington deepens.
Related: Trump Sides With Farmers In Battle Against Refiners
Meanwhile, Saudi Arabia has been assuring the market that it can replace all lost Iranian supply by boosting production to a record-high 10.7 million bpd-not even a million bpd more than what The Kingdom pumped prior to the OPEC+ agreement in November 2016. To compare, Iran's exports as of April, the month before Trump pulled the United States out of the nuclear deal, were more than 2.5 million bpd.
Traders remain tangled in uncertainty about the actual loss of Iranian supply as Iranian tankers conceal their routes by turning off the transponders used to track vessel movement.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
May be President Trump was irritated by India’s announcement that it will buy 9 million barrels of crude from Iran in November right after US sanctions have been implemented and also by Reuters' report that a VLCC carrying Iranian crude had offloaded it in bonded storage at the Chinese port of Dalian.
India with the world’s third biggest economy based on purchasing power parity (PPP) and a nuclear power in its own right will look after its own interests. India is affirming the message that it doesn’t recognize any sanctions except UN sanctions and it will therefore ignore US sanctions and continue to buy Iranian crude.
China, for its part, has made it clear on numerous occasions it has no intention of cutting Iranian imports of crude oil. Moreover, when it comes to US sanctions against Iran, China has the upper hand. It could singlehandedly nullify US sanctions on Iran by importing the total oil exports of Iran amounting to 2.125 million barrels a day (mbd) and paying for them in petro-yuan. Furthermore, the petro-yuan has made the US sanctions useless and has provided a way by which Iran could bypass the petrodollar and the sanctions altogether.
Threats by President Trump to buyers of Iranian crude are a manifestation of deeply rooted fear of the US losing hegemonic status as the “only indispensable superpower’ as can be witnessed by his escalation of his trade war with China, sanctions on Russia and threat of sanctions against Germany for going ahead with the Nord Stream 2.
The Trump administration is deluding itself when it says that it expects Iranian oil buyers to bring their purchases down to zero or sanctions will be imposed on them.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London