One of the growing concerns resulting from Trump’s decision to pull the US out of the Iran deal, is that oil – and gasoline – prices will jump so much, now that anywhere between 200kb/d and 700kb/d in Iran exports is taken out of the market, they will offset most benefits to US consumers from the Trump tax cuts. We covered this topic three weeks ago in “Rising Gas Prices Threaten To Wipe Out Trump’s Tax Cut Benefits.”
Incidentally, that’s just one of the less severe complications that could emerge over the next 6 months as the full extent of the new Iran sanctions is rolled out. As we reported earlier, Trump said the U.S. would levy the “highest level” of sanctions against Iran—including the punishment of Western companies and banks if they continue to do business with the country—as Washington pulled out of the Iranian nuclear accord.
And while new contracts are banned, companies and banks will have 90 days or 180 days to wind down their ties before risking penalties.
“Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States,” Trump said, envisioning a complete paralysis of the Iranian economy. As the WSJ summarizes, financial or business activities outlawed by Aug. 6, Treasury said, include exports of airplanes and parts, dollar transactions, trade in gold and other metals, sovereign debt and auto-industry deals. By Nov. 4, sanctions ban oil purchases, dealings with Iran’s ports and shipping industry, any ties to its insurance sector and dealings with the central bank.
But is the president really willing to alienate any of the countless European and global states that will continue trading with Iran, especially since the latest sanctions cover every major aspect of Iran’s economy, most importantly banning oil exports from the country, but also hitting the financial sector and the automotive and aviation industries.
That’s the big question.
Speaking at a press conference after Trump’s announcement, Treasury Secretary Steven Mnuchin said that “this administration is resolved to addressing the totality of Iran’s destabilizing activities”
And here something interesting emerged.
Ahead of the Trump sanction announcement, many had speculated that the president is playing hard ball only for purely populist/theatrical purposes, and in reality Trump is exiting the deal only so he can re-enter it, but on his own terms.