While all eyes are on the unfolding crisis in Venezuela, the Trump administration is laying the ground work for its next target: Iran.
The greatest source of pressure has come from sanctions on Iran, aimed at disrupting the country’s oil sector. To date, Iran has been able to weather the sanctions although the impact has been painful. Iranian production and exports plunged in the third and fourth quarters last year, but have stabilized since the U.S. granted a series of waivers to eight countries importing oil from Iran in November. In January, Iran’s production and exports appear to have held up, not posting any more additional losses.
According to Reuters, exports are averaging around 1.25 million barrels per day (mb/d) so far in February, which may actually be slightly higher from the 1.1 to 1.3 mb/d exported last month. Some countries may have opted to increase purchases, both because they secured waivers and because the expiration on those allowances expire in a few months. “We think people are taking more ahead of the deadline,” an industry source told Reuters.
Now comes the hard part. The Trump administration has vowed not to issue any new waivers, although there has been little details disclosed into whether or not the existing waivers will be extended.
The regime change effort in Venezuela will make the campaign to impose “maximum pressure” on Iran much more difficult. The acceleration of supply disruptions in Venezuela could and would tighten up the oil market. Oil prices are already at a three-month high, with Brent inching closer to $70 per barrel. Related: Oil Prices Near Three-Month High As Market Tightens
On its face, then, it would seem that the U.S. has little room to tighten the screws on Iran, having already used up the slack in the oil market on its Venezuelan campaign. There is not a ton of excess surplus in the market left over that could be used to knock Iranian oil offline.
However, we should not underestimate the possibility of a reckless push for confrontation with Iran. Discerning the intentions of the Trump administration is notoriously difficult, but that is especially true when there is a high level of disagreement even among officials within the government.
The New York Times reported in January that top Pentagon officials are concerned that national security adviser John Bolton “could precipitate a conflict with Iran.” The National Security Council, on Bolton’s orders, reportedly asked the Pentagon last year to draw up military options for strikes on Iran. The request “alarmed then-Defense Secretary Jim Mattis and other Pentagon officials,” the NYT reported.
The campaign against Iran didn’t end there. The recent U.S.-led summit in Warsaw, Poland was widely criticized as a meeting to gin up global action against Iran, so much so that the title and the agenda of the meeting had to be changed because of opposition in some European capitals. Billed as a conference on Middle East security instead, the meeting was still transparently aimed at Iran.
What to make of all of this?
It may all seem ham-handed, especially since much of the world is not playing along, but as Foreign Policy warns, this all sounds like the run-up to the war in Iraq in 2003. Indeed, the Trump administration may be scouring for ways to link Iran to Al Qaeda so that it can use the 2001 Authorization for Use of Military Force (AUMF). In other words, Trump officials are trying to find a way to legalize a war without having to turn to Congress.
Israeli Prime Minister Netanyahu did not help matters when his office tweeted – and then removed – that the Warsaw summit was intended “to advance the common interest of war with Iran.”
On February 11, the official twitter account of the White House tweeted out a video of John Bolton accusing Iran of pursuing nuclear weapons. To be clear, there is no evidence of this. Trump’s own intelligence services, as well as the International Atomic Energy Agency, dispute that fact, and indeed all evidence suggests Iran continues to remain in compliance with the 2015 nuclear agreement, even after the U.S. pulled out. Related: U.S.-China Trade Deal Could Boost Gasoline Prices
Nevertheless, referring to the 40th anniversary of the revolution in Iran, Bolton seemed to threaten the Iranian government. “I don’t think you’ll have many more anniversaries to enjoy,” he said.
Bolton has been at the forefront of the regime change campaign in Venezuela. It is clearly his hope that President Maduro is toppled quickly, after which, Venezuela’s new government, with the help of American oil companies (Chevron and Halliburton), revive the country’s dilapidated oil sector. A rebound in oil production would ease market pressure, which would conceivably smoothen the path for Bolton’s regime change plan in Iran.
It may not work out that way, not least because a revival of Venezuela’s oil sector won’t be a short-term affair. Moreover, if oil prices rise too much, there is an enormous risk of applying excessive pressure on Iran, to say nothing of a more aggressive military option. Trump has made clear that low gasoline prices is a top priority, so Bolton may even run out of political room to maneuver.
Still, at this point, he’s not exactly hiding what he has in store for Iran.
By Nick Cunningham of Oilprice.com
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