The Economist newspaper said, in a recent report, that Iran faces a major economic threat as the new US administration led by Donald Trump prepares to intensify economic sanctions against it.
According to the newspaper, pressure on Iran is escalating after the decisions of the previous US administration, as efforts are now focused on reducing Iranian oil exports to unprecedented levels.
A sharp decline in oil exports
In the final months of the Joe Biden administration, sanctions were tightened on Iranian oil tankers, causing their exports to China to decline by 25% to 1.3 million barrels per day.
With 20 million barrels of Iranian oil stuck at sea, especially off the coast of Malaysia and Singapore, Tehran faces a major challenge in finding new tankers to replace the tankers on the US sanctions list, according to the newspaper.
The Biden administration – according to the Economist – is working to target oil tankers carrying out the last stage of transporting Iranian oil to China, as major Chinese ports such as the Shandong Ports Group have begun to ban receiving these tankers.
This decision affected Chinese demand for Iranian oil, which led to reducing the price gap between Iranian crude and global Brent crude from $6.50 to only $1.50, according to the newspaper.
Trump administration scenarios
Expectations indicate that the Trump administration may escalate its strategy by including more carriers and traders on the sanctions list.
One of the options proposed – according to the newspaper – includes imposing sanctions on any Chinese port that receives shipments of Iranian oil, or even imposing huge customs tariffs on China until it commits to stopping its imports of Iranian oil.
Experts expect that reducing Iranian oil exports by one million barrels per day by summer will lead to a rise in global oil prices by $5-10 per barrel in the best scenario.
But the worst scenario may witness an escalation from Iran that may even close the Strait of Hormuz, the vital passage through which 30% of the world’s seaborne oil passes.
The report warns of potential geopolitical repercussions, including violent reactions from the Iranian side that could lead to broader unrest in the region.
