A Goal for Iran’s Oil Exports: Zero American frackers can reduce the impact of higher crude prices.
https://www.wsj.com/articles/a-goal-for-irans-oil-exports-zero-11555972882
President Trump wants to exert “maximum pressure” on Iran, which is why he is giving the sanctions screws another firm twist. Any country that imports Iranian oil will soon face U.S. penalties—with no exceptions. Last year seven nations and Taiwan were granted waivers through May 2, giving them time to adjust supply lines. These waivers won’t be extended, the State Department said Monday, helping to push the benchmark oil price to $74 a barrel, a nearly six-month high.
Italy, Greece and Taiwan have already ended their Iranian oil imports. That leaves five countries at risk of U.S. sanctions: China, India, Turkey, Japan and South Korea. Two are close allies, and no doubt their leaders will protest this stiff medicine. But the Trump Administration has given them enough warning, not to mention a six-month waiver. That’s plenty of time to make other arrangements.
By all accounts, Iran’s economy is in trouble. “To date, we estimate that our sanctions have denied the regime well north of $10 billion,” Secretary of State Mike Pompeo said Monday. “The regime would have used that money to support terror groups like Hamas and Hezbollah and continue its missile development” and “it would have perpetuated the humanitarian crisis in Yemen.”
Mr. Pompeo reiterated the White House goal “to deprive the outlaw regime of the funds it has used to destabilize the Middle East for four decades, and incentivize Iran to behave like a normal country.” To that end, the U.S. intends to drive Iranian oil exports to zero.
That’s a potential shock for global oil markets, but the Administration says it is working with Saudi Arabia and the United Arab Emirates to fill any gap in supplies. American frackers will help, too, as they gear up in response to higher prices. The ability to increase sanctions on a major oil supplier without triggering a giant oil-price shock is another illustration that the U.S. energy boom offers strategic as well as economic benefits.
To the extent Iran sanctions push up oil prices, they won’t be pain-free for Americans. Gasoline in the U.S. is nearing an average of $3 a gallon—and surpassing $4 a gallon in the Progressive Republic of California. Oil supplies worldwide were already tightening. Amid a socialist collapse, Venezuela is now pumping only 732,000 barrels a day, less than a third of its output in 2015. Renewed fighting in Libya also has made oil analysts wary.
Mr. Trump’s Iran strategy thus involves some political risks, especially considering how tightly oil prices are linked with public feelings of economic well-being. No President wants to run for re-election with rising gasoline prices. Yet the Trump Administration, to its credit, shows no signs of backing down. If Iran wants sanctions eased, it can stop spreading terror and renegotiate the nuclear deal.
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