The president of the United States , Donald
Trump, had pledged to be tough on Iran during his presidential campaign. Since the
time he became the President, Trump has stayed true to his words by reinstating
the sanctions on Iran in 2018, making it an unfortunate year for the country.
In May 2018, under the instructions of the
President, the U.S. pulled out of the Joint Comprehensive Plan of Action which
was signed with Iran and announced that the sanctions would return in two
phases. The sanction related to the crude oil, which serves as Iran’s economic
lifeline, was reintroduced towards the end of 2018. It is widely believed that
the sanction could have been worse for business in Iran had the U.S. not
granted waivers to eight significant importers like China, India and Japan, who
account for the highest amount of Iranian crude oil.
As the U.S. and Iran remain embroiled in
controversies, economists, politicians and analysts are awaiting the latest
developments before making critical business decisions. The oil market in the
recent history had proved to be somewhat conservative which was evident when
the world markets factored in sharp declines in the oil production of Iran
after Donald Trump had aggressively threatened sanctions on Iran. Post the
threats, the markets were forced to recalculate once generous waivers were
handed out to some of the biggest oil customers of Iran. Experts believe that
the oil market has the potential of being extremely volatile throughout 2019
owing to the sanctions. Many even think that there is a strong possibility that
some of the waivers that are applicable now, may not be available to Iran
sometime in the future.
The sanctions have already proved to be harmful
to the economy of Iran and their effect could be even more damaging in the
future. A state of economic shock has engulfed the country as several foreign
companies have withheld new investments or hinting that they may be exiting
soon. Numerous companies are also worried that their continued association with
Iran may put them in a position where they may no longer have access to the U.S.
market or they will be excluded from the dollar-based financial system.
The Iranian oil market had already witnessed a
decline of over 1 million barrels per day between June to September. It fell
from 2.7 million barrels per day in June to approximately 1.7 or 1.9 million
barrels per day in September. In addition to this, there has been a marked
increase in unemployment in the region coupled with the issue of rapid
inflation. It is therefore understandable that the Iranian Rial has slumped in
the recent months.
Different affected countries have looked to
find measures and counter this problem. India adopted a unique strategy of
using escrow accounts in banks of Iran for the payment of Iranian crude oil.
Further, the payments were made in Indian Rupees, thereby avoiding punitive
action from the U.S. In addition to this, it was ensured that the payment was
spread across five banks to reduce the risk of adding sanctions by the U.S on
any one of the banks.
Meanwhile, the European Union too has shown
interest in continuing business with Iran and are considering creating a
mechanism for the purpose. The Government will soon generate a new payment
system so that it will continue the business relations with Iran without
punitive measures from the U.S. This move has however been criticized by the
U.S. and has been labeled as a counterproductive measure for global peace and
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