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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2965

Looming Sanctions against Iran in Two Weeks: no respite for Iran from the crisis of its regional rival

Hemantha Abeywardena writes from London…

As Saudi Arabia, the world’s largest oil producer, is fighting its corner in the wake of the death of a dissident journalist, the heightened, global consequences that stem from the set of sanctions to be imposed on Iran, the theological arch-rival of the former, have been somewhat eclipsed by the new geo-political developments.

Although, the threat of certain sanctions on Saudi Arabia is getting stronger by each passing day in the aftermath of the death of Jamal Khasoggi, the columnist of the Washington Post, the oil price was not influenced by the looming uncertainty. On the contrary, the price went down, defying the popular geo-political logic.

Some analysts attribute the drop in price to the increase in drilling rigs in the US by 4, totalling the count to 873 and the pledge by Saudi Arabia to increase the output in response to the pressure from the Trump administration.

With the economic sanctions on Iran just less than two weeks away, those who rely on the basic, good, old supply/demand relationship, quite sensibly, believe that the oil price will go up in proportion to the loss in supply from Iran.

Although, in the case of Saudi Arabia, the anxieties remain in the sentimental realm as of now, Iranian issue permeates much further than that - in to the physical realm. In short, the effect on the supply is real and significant.

Commodity Futures Charts

After the US sanctions come into effect on November, 4, the fact that whether the oil price will stay relatively static remains to be seen in the first few weeks.

Meanwhile, the long suffering of the ordinary Iranian people seems to continue unabated. The Iranian authorities have recently tried to address the issue while focusing on the two strata of the society – those who fall into the lowest income brackets; they have allocated some funds to alleviate the inevitable impact when the sanctions are in full force.

Adding insult to injury, both European banks and American banks are not keen on facilitating the transfer of money from the domiciled Iranians to their elderly relatives back in Iran, making the dollar crisis even worse.

Imposing sanctions again Iran by the US not a new political phenomenon; it dates back to late 70s. During the four decades since, however, the scale and scope of the sanctions have been evolving with the screw being tightened in every single stage against Iran.

This time, however, the degree of aggressiveness when it comes to penalizing companies that do business with Iran has taken an exponential proportion.

The way countries like Japan, India and even China fell in line, despite the initial stubbornness to do things otherwise, shows the power that the US wields in the global financial sector. At present, no nation is plucky enough to call President Trump’s bluff – and then face the music.

As far as Iran is concerned, the cumulative impact is already colossal: the currency is in freefall; unemployment is rising and food prices are skyrocketing; the dissent, although, manageable at this stage, breaks out intermittently in various regions, placing the authorities edgy.

In the past, Iran has vowed to disrupt the flow of oil by other nations in the region, mainly Saudi Arabia, through the Strait of Hormuz, in the event of it being denied the same. Recently, however, Iran chose to keep a low profile over its intentions. It even maintains a mysterious silence over the recent troubles of its main rival region in the region, Saudi Arabia.

All in all, a palpable uncertainty oscillates in the geopolitical horizon. Unfortunately, its impact on the global economy, judging by the positions held by every reliable indicator, does not look good and promising.

- Asian Tribune -

Looming Sanctions against Iran in Two Weeks: no respite for Iran from the crisis of its regional rival
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