When Trump returns to the presidency, will Iran’s oil market and ties with China suffer? – First post

Former President Donald Trump’s return to the White House could mean tougher enforcement of U.S. oil sanctions on Iran, potentially cutting into global supplies, but could also carry geopolitical risks, including increasing the ire of his top client China, according to analysts.

A tough crackdown on OPEC member Iran would support global oil prices, but the effect could also be offset by other Trump policies, from measures to expand domestic drilling to tariffs on China that could dampen economic activity or easing relations with Iran. Russia, which could relax its authorized crude oil supplies.

“Trump is cutting oil prices both ways,” said Clay Seigle, a board member of the Houston Foreign Relations Committee and chairman of its finance committee.

Iranian crude oil exports reached their highest level in years in 2024 as the country found ways to circumvent punitive sanctions targeting its revenues. Trump reimposed sanctions during his first presidency after the US unilaterally withdrew from the Western nuclear deal with Tehran in 2018.

Trump, a Republican, said during his re-election campaign that President Joe Biden’s policy of flouting strict sanctions on oil exports had weakened Washington and emboldened Tehran, allowing it to sell oil, hoard money and expand its nuclear efforts and influence through military militias.

Jesse Jones, head of North American upstream oil at Energy Aspects, said the Trump administration’s return to a maximum pressure campaign on Iran could result in a million barrels per day (bpd) reduction in Iranian oil exports.

“This can be done relatively quickly without additional legislation, simply by applying the sanctions that are already in place,” he said.

Research group ClearView Energy Partners has estimated that between 500,000 and 900,000 barrels per day could be taken off the market.

“THE MILLION DOLLAR QUESTION”

But a tougher stance on Iran also means tougher measures against China, which does not recognize US sanctions and is the Islamic Republic’s largest oil buyer.

“The million-dollar question is how much financial pressure are you willing to put on Chinese financial institutions,” said Richard Nephew, a Columbia University professor and former deputy U.S. special envoy for Iran.

Nephew said China could retaliate by stepping up its work in the BRICS club of emerging economies, which includes Brazil, Russia, India, China, South Africa and other countries, including by reducing dependence on the dollar for oil and other transactions. goods.

In September, Trump spoke at the New York Economic Club about the risks sanctions could bring to the dollar’s dominance.

“I’ve been a user of sanctions, but I put them in and out as quickly as possible because they end up killing your dollar and everything the dollar represents,” Trump said at the time.

“So I use sanctions very forcefully on countries that deserve them, and then I lift them because, look, you lose Iran. You are losing Russia,” he said.

Seigle said tougher measures against Iran could have a positive impact on oil prices. But the impact could be muted, especially if Trump follows through on his campaign promises to impose blanket tariffs on U.S. imports to protect domestic production, including a 60 percent tariff on all goods from China.

“A trade war that reduces GDP will lead to lower oil demand and lower prices,” Seigle said.

Ed Hirs, an energy fellow at the University of Houston, said Trump would also likely ease sanctions on the Russian energy industry imposed by Western countries as punishment for Russia’s invasion of Ukraine. Trump promised during his campaign to “fix” the war in Ukraine before taking office in January.

“I expect Trump to lift all sanctions on Russian oil,” Hirs said.

Western sanctions on Russian oil are not aimed at stopping supplies, but only at limiting Russia’s export revenues to $60 per barrel when sold using Western maritime services. Sanctions have shifted the market for Russian oil from Europe to China and India, increasing costs for Russia.

(Except for the headline, this story has not been edited by Firstpost staff.)