The sanctions continue: Washington targets the Iranian petrochemical sector

The sanctions continue: Washington targets the Iranian petrochemical sector

- in Releases
54
Comments Off on The sanctions continue: Washington targets the Iranian petrochemical sector

As the tension between the United States and Iran escalates and additional US arms are brought into the region to counter possible Iranian threats, the United States has put Iran’s largest petrochemical group under sanctions for its financial support to the Revolutionary Guard, which is destabilizing the Middle East.

WASHINGTON (Reuters) – The treasury department said in a statement,” New sanctions by Washington are aimed at Iran’s petrochemical sector, including the country’s largest petrochemical holding group, for its financial support to Iran’s Revolutionary Guard. It added the measure “aims to reduce the financing of Iran’s largest and most lucrative petrochemical company, including 39 branches and dealers abroad,” And it pointed out that the group and its subsidiaries account for 40 percent of Iran’s petrochemical production and 50 percent of the sector’s exports. The statement of the treasury department added, last year, Iran’s Oil Ministry awarded Khatam al-Anbiya company, the economic and engineering arm of the Revolutionary Guard, 10 projects in the oil and petrochemical industries worth $ 22 billion, that is, four times the official budget of Iran’s Revolutionary Guards.
“By targeting this network, we intend to cut off funding for key elements of the Iranian petrochemical sector that are providing support to the Revolutionary Guard,” US Treasury Secretary Steven Menuchin said. “The Revolutionary Guard has infiltrated systematically into key sectors of the Iranian economy to finance itself,” said US under Secretary of the Treasury for terrorism and financial intelligence Seagal Mandler. From his part, US Secretary of State Mike Pompeo said the campaign of extreme economic pressure on Iran was continuing, calling on Tehran to halt its nuclear threats and ballistic missile tests, support for terrorist groups and stop the arrest of foreign nationals.

The new sanctions come as the administration of President Donald Trump seeks to increase economic and military pressure on Iran over its nuclear and ballistic missile programs as well as to launch proxy wars in Syria, Iraq, Lebanon and Yemen, according to US officials. The US approach is also part of a general economic policy of sanctions and tariffs that serves as a tool for achieving the political goals of President Trump’s administration, which is reflected in the tense trade relationship with China, as well as with Russia and the neighboring countries of the United States, as well as the European Union.

US President George W. Bush pitted hostility on Iran and upset US major allies when he pulled out last year from a 2015 agreement between Iran and world powers, under which Tehran would curb its nuclear program in return for lifting some sanctions and further easing it from Western countries. Tensions between the United States and Iran have grown since April because of Washington’s moves to cut Iranian oil exports and send a carrier group to the Middle East to deter any Iranian attacks on US interests and due to the recent attacks on Saudi, Norwegian and UAE tankers where Washington. Blamed Tehran .
As for the impact of these sanctions on the Iranian economy, observers of Iranian affairs believe that the recent sanctions will only have a modest effect because non-US companies are already avoiding dealing with the Iranian petrochemical sector because of the current sanctions. Susan Maloney of the Brookings Institution in Washington described the latest US sanctions as a ” it is a next normal step within what I think is an extra set of sanctions on Iran’s involvement in the global economy. ” “Even when the net effect is relatively small, I think the administration depends on overlapping authorities and sanctions that increase pressure on Iranians and create a feeling that the entire economy is besieged,” she said. With this new imposition of US sanctions on Iran, the question arises: Is the US sanctions policy on Iran changing the map of its impact in the Middle East?
The US administration of Donald Trump wants to dry up Iran’s hard currency. It goes directly to oil, the main source that feeds the Tehran treasury in what it needs to make a long-lasting and controversial influence in the Middle East. For Trump, when Iran is unable to secure what is needed from dollars and euro, it will not be able to pay the bills of its allies and pay their salaries and the pro-propaganda industry that contributes to the consolidation of its regional agenda against Washington and its allies in the region.
This intersects with much of the 12 demands that Secretary of State Mike Pompeo raised in May last year when his country came out of the nuclear deal, most of which focused on Iran’s regional role extending from Iraq to Yemen, Palestine, Lebanon and Syria. Nearly a year after the United States came out of the nuclear deal; the sanctions do not seem to have changed the map of Iranian influence in the region. Although it is true that it has greatly affected Iran’s economy and its transfers to its allies in the region, specifically Hezbollah in Lebanon and the Palestinian factions, but the impact Trump is looking for has not occurred and the need has become greater to tighten the screws, although this is at the expense of some of Washington’s allies in the world.
Therefore, the decision to cancel exemptions from the purchase of Iranian oil given by Washington to eight countries , China, India, South Korea, Japan, Turkey, Greece, Italy and Taiwan.

The United States has justified its decision to open the way for these countries to seek alternatives to Iranian oil, especially those with difficulties such as South Korea, Japan and India. Other countries such as Greece, Italy and Taiwan did not want to take advantage of the exemptions and decided to cut buying immediately, while China and Turkey opposed it. It was not a challenge as long as the exemptions were granted, but its withdrawal put Iran, the countries concerned and the oil market in front of questions of commitment, objection and circumvention.
Before the market moved in the shortfall that could arise, Saudi Arabia and the UAE, after welcoming the decision, would have assured that they would cover any shortfall that may occur. This was confirmed by the White House. Turkey and China renewed the objection and announced that they would continue to buy Iranian oil. While Ankara and Tehran have launched a mechanism to confirm the continuation of import and export operations, it is not yet clear whether China will merely object to the objection or whether it has developed its objection to increasing imports with a ready mechanism to pay by local currency.
While Washington is counting on a gradual response from Beijing to US measures that could have a major impact on it, China does not seem to be in favor of a positive or negative solution in practice, but what has been touched over the past few months has been a disparity in the quantities of Iranian imported oil . This has to do with China’s desire to get a better price from Iran, not only at the oil level but also in the form of other economic opportunities within Iran that Beijing might be interested in.
In this context, mutual concerns between the two countries can not be ignored, as China’s national oil company has won several contracts to repair and sustain oil fields in Iran, including Azadegan south-west of Khuzestan province in 2009, but Tehran canceled the contract in 2014 because of what it called a non-compliance by China . The investment of Chinese enterprises in the United States has increased Chinese reluctance to increase the amount of oil imported from Iran, which fell after the US sanctions by a quarter, which draws a clear distance between the political situation and practical policy in the relationship between Beijing and Tehran. India’s oil imports from Iran prior the US announcement are expected to reach 7 million barrels a month, up 35 percent from the usual level to compensate for the subsequent shortfall. Although it has set up with Iran a special mechanism, but it seeks to neutralize itself from the list of provocative states to Trump, in favor of its interests which seem till now are not linked with Iranian oil.

Teheran gives New Delhi 60 days to pay, free shipping insurance, low shipping rates, and it can not ignore the project of the southern port of Chabahar on the Indian Ocean, which the two countries are jointly building, and by the way it is exempted from sanctions .
In light of the above, the declared US goal of cutting Iran oil sales to zero does not appear to be possible under the current circumstances, despite all the pressure it can inflict on Tehran. At the same time, however, it will have clear effects on Iran’s oil policy and the structure of the Iranian economy, which is moving year after year to reduce reliance on oil for other exports.
In the budget of 2019/2020, the proportion of oil imports from total imports was less than 30%, but it is still 12% away from the 15% rate it should reach according to the recommendations of the Sixth National Development Plan.
The percentage has gradually declined over the past years based on what is known in Iran as the theory of the economy of resistance, launched by the guide Ayatollah Ali Khamenei, which is part of it based on ending dependence on oil and promote self-sufficiency and the building of economic model, can continue under external pressures.

But applying the theory of a fully resistant economy as seen by Khamenei, which Trump’s pressure will gradually lead to, means that Iran will become more isolated from the global economy, just within exceptions and will gradually develop its own capacity to face similar external actions.

Therefore, assuming that Iran can withstand another one-and-a-half years under sanctions and adapting to its conditions, it will adapt to the minimum as it did with previous sanctions, but the bad news is that the conditions of the nuclear agreement in 2015 may not be appropriate in the future, specifically with the turning of the agreement in the present circumstances, into a heavy burden on supporters of the course because of the inability to support its course and the negative repercussions of the sanctions.
The conflict between Tehran and the United States is going along with the nuclear deal in parallel to an internal Iranian clash over the feasibility of negotiating with the West in general and concluding agreements with it. The clash will be more evident in the headlines of Iran’s general elections, which will take place early next year, and no doubt on its outcome, which will determine who will win the majority of parliament before the presidential elections in the summer of 2021. But what are Iran’s options in the face of US sanctions?

After US President Donald Trump took his sudden decision to tighten the screws on Tehran’s economy, already strained by US sanctions, Iran responded by threatening to close the Strait of Hormuz to oil tankers. In theory, Iran’s navy has the ability to close the strait, but the same decision-making process It will not be simple, and do not expect to be hasty.

Because this has only one meaning, namely, the war, and the Iranian regime knows this well and realizes that this is what Trump and Iran’s enemies are pursuing in the region. Although more than one incident of “naval harassment” took place between Iranian warships and US warships flying through the Gulf , most notably in 2007 and 2008, and almost to be turned into actual clashes, Tehran has never worked to close it before.

It is understood that the threat of closing the strait is Tehran’s most important pressure card. The actual closure of the Strait will lead to war so it is inevitable because neither Saudi Arabia nor the rest of the Gulf states nor even China will bear catastrophic consequences for their economies. The US Fifth Fleet is based in Bahrain, and its warships going through the waters of the Gulf to ensure that there are no obstacles to the movement of tankers from the Gulf to the Indian Ocean, through the Strait of Hormuz.
During the tense period of 2011, the Pentagon spokesman at the time, Captain John Kirby, confirmed Washington’s concern that its military presence in the vicinity of Hormuz “is sufficient to comply with our security commitments to friends and partners in the region as well as the international community,” in clear reference to the US military readiness for any Iranian attempts to close it . Apart from the Iranian threats, the result of any direct war is known if the United States is a party to it.

Iranian Studies Unit
Rawabet Center for Research and Strategic Studies