Iran Nuclear Deal: US Reimposing Sanctions Threatens War In Middle East

Iran Nuclear Deal: US Reimposing Sanctions Threatens War In Middle East

"None of these three countries will be prepared to fully comply with USA demands; however, the more significant part of Iranian exports is where Iran earns hard currency from the sale of its crude".

National security adviser John Bolton arrives for a joint news conference between U.S. President Donald Trump and Germany's Chancellor Angela Merkel in the East Room of the White House in Washington, U.S., April 27, 2018.

In a tweet on Sunday, Trump wrote: "Remember how badly Iran was behaving with the Iran Deal in place".

EIA estimates that global oil inventories fell an average of almost 0.6 million barrels per day (b/d) in each of the past five quarters (January 2017 through March 2018). At least some of that oil will now be pulled from the market - at a time when oil prices are already rising because of production cuts by OPEC and Russian Federation as well as instability in Venezuela. Geopolitical tensions would likely ratchet up to record levels, putting sharp upward pressure on oil prices and breaking the catch 22 of U.S. rising supplies versus Opec plus Russian Federation supply cuts.

Trump telegraphed the move, and oil prices shot up in recent weeks as traders anticipated it. Crude has topped $78 a barrel, the highest since 2014, following Trump's sanctions announcement. Prices have gained over 8% over the past month and 15% since the beginning of the year.

USA sanctions on Iran will have a six-month period during which buyers should "wind down" oil purchases, meaning any loss of supply will not be immediately felt in the market.

Other fundamentals driving oil prices up stem from Asian demand, which is seen going higher on the back of a buying spree by China.

Meanwhile, the USA government tried to further pinch Iran's finances by disrupting a currency exchange network allegedly used to transfer millions of dollars to Iran's Revolutionary Guard.

It was widely believed to have been a successful piece of worldwide diplomacy at the time, but Trump repeatedly referred to the deal as being the "worst ever" during his election rallies, pointing out that it made no mention of the Iranian ballistic program or the overall influence Iran exerted in the Middle East. Heightened geopolitical fears in the Middle East often raise prices. France has come down heavily on the decision, with French Finance Minister Bruno Le Maire saying that Europe can not afford to follow the whims of the United States when it comes to protecting its economic and diplomatic interests, according to BBC.

"The three or four-year period of quiet in terms of geopolitics impacting oil markets is over", said Canary's Eberhart.

"Reintroduction of sanctions will not stop Iran from selling its oil, but at the same time it will reduce the presence of Iran in global oil markets", according to Emadi. Now, the outcome of the United States getting out of it is to reimpose all American sanctions as they were before the deal came into effect.

Just how much of Iran's growth in oil production is at risk - and when it could decline - is uncertain.

The US will re-impose sanctions on Iran and firms dealing with it could be hit, angering signatories like France, according to the BBC.

"If the government of New Zealand obeys any sanction against Iran, it is not sanction against Iran it is a sanction against the New Zealand companies", Mr Mianji said.

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