Iran can’t seem to get a break, at least as far as the U.S. is concerned. Yesterday, Sigal Mandelker, undersecretary of the Treasury for Terrorism and Financial Intelligence, told reporters in Singapore that Washington placed additional “intense pressure” on Iran this week.
“It’s very important that these countries [Malaysia, Singapore, and others] have important visibility into the different ways the Iranian regime uses to deceive the international community in connection with shipment of oil,” Mandelker said. She added that she would stress the inherent risks in dealing with Iran in meetings over coming days with government officials in Malaysia, Singapore, and India.
“This trip follows on the heels of additional intense pressure we have placed on Iran. In just the last week, we took action against nuclear scientists and agencies and other key personnel involved with the Iranian regime’s past nuclear weapons entities,” Mandelker said. “We are making them radioactive to the international community.”
She added that action taken so far this week was also against a network involved in an Iranian sanctions evasion scheme, that includes Iran, the UA, and Turkey-based front companies. She added that the U.S. was also bringing “maximum pressure” on the Venezuelan government of President Nicolas Maduro.
Trump’s bulldog foreign policy approach
Mendelker’s comments come at a precarious time for President Donald Trump. On the one hand, he has been arguably successful using a tougher stance internationally than any of his predecessors dating back to the Reagan administration from 1981-1989.
Trump’s tough trade actions against China, for example, which has had sought bipartisan support in Washington, is bearing fruit and forcing Beijing to consider once thought non-negotiable systemic changes in how it does business, including claims of intellectual property rights theft and state support for its business sectors. In Venezuela, tough Trump action and fresh sanctions are hitting the government of Nicolas Maduro hard, particularly its ability to earn petrodollars, likely ushering in its demise. Trump’s Iran policy is also hitting Iran so hard that its currency and economy are still floundering amid popular unrest, especially among younger Iranians. Related: China’s Mad Scramble To Boost Domestic Oil Production
On the other hand, these foreign policy decisions could also haunt the president as the 2020 election cycle nears. Due to Trump’s tough stance against Iran and Venezuela, both major OPEC producers, ongoing support under oil prices is persisting. The loss of Iranian and Venezuelan barrels from global markets, along with the success of the current OPEC+ oil output deal is driving up oil prices near $70/barrel - a price point that Riyadh has indicated it is comfortable with. On Friday morning, oil prices for both London-traded global benchmark Brent, and U.S.-benchmark, NYMEX-traded West Texas Intermediate (WTI) crude futures were on track to post their largest first quarter in a decade, during the onset of the global financial crisis. During the first quarter of 2009, both oil benchmarks gained around 40 percent.
WTI futures were at $59.56/barrel at 0211 GMT, up 26 cents, or 0.4 percent, from their last settlement. WTI futures are set to rise for a fourth straight week and are set for a whopping first-quarter gain of 31 percent. Brent crude oil futures, for their part, were up 30 cents, or 0.4 percent, at $68.12/ barrel. Brent futures are set to increase by 1.7 percent for the week and are set to climb by 27 percent for the first quarter.
Trump’s murky waters
The danger for Trump is that higher oil prices translate to higher gasoline prices, putting the president in the crosshairs of voters, particularly swing voters or those undecided, that could vote their pocketbooks next year instead of party loyalty. The national average price of gas hit $2.69 on Thursday, up 28 cents from a month ago and up 9 cents from a week ago, according to AAA. California has the highest average price in the nation at $3.57, according to AAA. Alabama is the cheapest at $2.41. Related: IMO2020: Can We Expect Extreme Price Shocks?
Moreover, RBOB gasoline futures are surging 42 percent so far this year, a development that has prompted the president once again to turn to influence OPEC production. On Thursday, Trump tweeted “Very important that OPEC increase the flow of Oil. World Markets are fragile, price of Oil getting too high. Thank you!”
However, it’s unlikely that OPEC, moreover OPEC’s de facto leader Saudi Arabia, will comply with Trump’s tweets for mercy in global oil markets any time soon. The last time the Saudis complied with the president’s wishes, albeit via Twitter also, they were caught flat-footed when he issued several waivers for Iranian oil - a development that still disappoints the Saudis. This time, the president may be on his own when trying to sway global oil markets, and that proposition is not comforting for Trump supporters as 2020 nears.
By Tim Daiss for Oilprice.com
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It was President Trump who sought negotiations to end the trade war with China not the other way. He did it because the trade war was costing the United States’ economy far more than the Chinese economy. This is because the Chinese economy is bigger and far more integrated in the global trade system than the United States’. Moreover, China will never put its name to any agreement that enables President Trump to claim victory. Still he will claim victory as he always does after each failure like threatening Angela Merkel the German Chancellor with sanctions against her country if she didn’t drop the Nord Stream 2 gas pipeline or after his futile meetings with North Korean leader Kim Jong-un.
The other false claims are that US sanctions against Iran and Venezuela are causing loss of Iranian and Venezuelan crude oil exports. If these claims were true, oil prices would be now in the $80s.
Moreover, the Trump administration has no alternative but to renew the sanction waivers it issued last year to the eight biggest buyers of Iranian crude when they expire in May or issue new ones for no other reason than to use them as a fig leaf to mask the fiasco that US sanctions have failed and also the fact that the zero exports option is a bridge too far.
As for Venezuela, it seems that US sanctions are already failing to adversely affect Venezuelan oil production and exports to the extent that the United States is now resorting to pressure foreign commodity traders and refiners to suspend their trades with Venezuelan oil.
The push against oil traders and refiners comes amid a loss of momentum in the US-backed coup. Moreover, Venezuela has managed to redirect the 500,000 barrels a day (b/d) it used to export to the United States to China, India and the European Union without any loss to the global oil supply. China has been buying big volumes of Venezuelan oil estimated at 531,000 barrels a day (b/d).
As for rising oil prices, President Trump can tweet to his heart’s content but it is very unlikely that Saudi-led OPEC will comply. Saudi Arabia will not come this time to his aid as it did in June last year when it agreed to raise its oil production to offset an expected decline in Iran’s oil exports and ended up with a collapse of oil prices by 43% from $87 a barrel to $50 and with the Trump administration issuing sanction waivers to eight of Iran’s biggest buyers of its crude.
And with surging oil prices, President Trump should expect higher rising gasoline prices, putting him in the crosshairs of voters, particularly swing voters or those undecided that could vote with their pocketbooks next year instead of party loyalty.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London