CAIRO. — US President Donald Trump’s decision to ban Iranian oil and end waivers for eight major buyers importing Iranian oil will greatly harm Iran’s economy, yet oil market will remain manageable, said Egyptian political experts.
Trump’s administration cancelled exemptions to import oil from Iran, as the US president says he intends “to bring Iran’s oil exports to zero.”
Iran’s economy had already been severely affected by the sanctions imposed by the international community over its nuclear program, leading Iranian President Hassan Rouhani in 2015 to agree on a deal with the United States and five other countries to limit Iranian nuclear activities in return for lifting the sanctions.
In 2016, Iran’s GDP growth rate hit 12.3 percent, according to the Central Bank of Iran, thanks to oil and gas industry, yet it slowed to 3.7 percent in 2017, leading to economic discontent and relevant protests.
Trump’s recent decision is likely to further deteriorate the Iran’s economy and narrow space for Iranian economic development.
“Since the sanctions deprive Iran of at least US$10 billion per year, the US decision will certainly cause economic deterioration in Iran,” said Mohammed Mohsen Abo el-Nour, an Egyptian researcher in Iranian affairs and chairman of the Arab Forum for Analyzing Iranian Policies (AFAIP).
“The US sanctions actually target depriving Iran of any chances for domestic development, whether related to infrastructure projects or spending on transport, real estate, health and education,” Abo el-Nour told Xinhua.
The expert expressed his belief that Iran even makes more than US$20 billion per year out of its oil exports, “not just US$10 billion as US Secretary of State Mike Pompeo says.”
Trump has been attempting to halt Iran’s oil exports since he imposed sanctions on Iran last November as punishment for alleged Iranian nuclear ambitions and support for some militants in the Middle East.
However, Washington adopted a gradual approach, providing waivers to its allies and trade partners regarding their oil purchases from Iran.
“The US decision will shake the Iranian oil market that produces about 1.5 million barrels per day,” said Tarek Fahmy, political science professor at Cairo University.
The professor explained that the US move will definitely lead to “increasing challenges and problems inside Iran,” referring to a state of political instability inside the country that could worsen in the light of expected economic hardship.
Trump’s recent sanctions regarding Iranian oil exports were made after reassurances from leading oil producers in the Organization of the Petroleum Exporting Countries (OPEC), including allies Saudi Arabia and the United Arab Emirates (UAE), to fill in the gap.
“OPEC members vowed in a meeting last fall to provide at least 1 million barrels per day when the U.S. sanctions on Iranian oil are in effect, which means they will make up for Iran’s share in the international market,” Abo el-Nour told Xinhua.
The AFAIP chief pointed out that Iran’s regional rival Saudi Arabia said it can produce about 2.8 million barrels per day for the international market.
Saudi Arabia and other Gulf Cooperation Council members, including the UAE and Bahrain but excluding Qatar, Kuwait and Oman, have permanent concerns over Iranian regional expansion ambitions and rely on Washington for protection against any Iranian threats.
“I believe these countries will not make much economic gains from filling the gap caused by the absence of Iranian oil, but for them the political and geostrategic gains are much more important than economic calculations,” Abo el-Nour explained.
Iranian Foreign Minister Mohammad Javad Zarif said Wednesday that his country seeks good relations with Saudi Arabia, the UAE and Bahrain as it has “extremely good relations with Qatar, Kuwait and Oman.”
“Saudi Arabia and the UAE have announced willingness to fill in the gap caused by the halt of Iranian oil imports, so there’s no problem expected in the international oil market as a result of the U.S. move,” Fahmy said.
“I believe that the Saudi-UAE side arranged the matter well with the US side,” the professor told Xinhua, raising a possibility for some short-term shortage that will be gradually contained.
The Strait of Hormuz is the only sea passage for trade in and out of the Gulf; at least 20 percent of the world’s oil trade goes through it. In the light of the US decision to impose sanctions on Iranian oil exports, Tehran hinted threats to close the strategic waterway.
However, experts believe that Iran is far from thinking of taking military measures to close Hormuz Strait or reactivating its nuclear reactors in response to Washington’s move, referring to any of them as “a big strategic mistake.”
“If Iran does any of the two moves, it will face an international dilemma because Trump can easily get international consensus to punish Iran,” said Abo el-Nour, stressing that Iran’s decision makers are smarter than getting involved in such measures.
Fahmy echoed Abo el-Nour’s view that Iran is unlikely to close Hormuz Strait, adding that such Iranian threats are only meant for “media campaigns.”
“Hormuz Strait is an international waterway and Washington will not allow its closure or usage as a card in the hands of Iran,” the professor said. – Xinhua