The tensions between Tehran and America are an escalating step in a dangerous economic region

The tensions between Tehran and America are an escalating step in a dangerous economic region

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Researcher Shatha Khalil *

Translated by : mudhaffar al-kusairi

Despite Iran ‘s circumvention on US sanctions, by all means, whether by concluding declared and unannounced bilateral and collective agreements, or reviving the role of intermediaries who buy Iranian oil locally, and then re-sell it in global markets under the guise of being from the Iranian private sector and not affiliated with the government. ” And, “Bursa” was established in the year 2012, and it can be used in the future for the fraud operations that the Iranian regime is planning to undertake, and some aspects of trade in national currencies, to escape the pressures of the dollar and bank transfers in it, the Iranian economy remains weak, fragile and vulnerable to collapse: This is under the ceiling of the “resisting economy” established by the leadership of Supreme Leader Ali Khamenei years ago.

 

It is included within the economic plans of the government, which the government and the people have, to create the economic development.
As the resisting economy was made by relying on national capabilities and settling the citizens ’problems … The question that arises now : a resisting economy against whom?
If Iran accepts the terms of negotiating regarding its nuclear program with a group of (5 + 1), to announce that its relationship with the West has started a new page, and has entered into economic deals with Italy, France and Germany that amounted to billions of dollars, and allowed the return of some foreign companies to work on its soil.

Does Iran have resistance to the western economy, and it hopes its investments in the coming period and is waiting for its citizens to be brought in to revive tourism in it?

However, expectations have changed completely …after the assassination of the commander of the Iranian Revolutionary Guards Corps, Qassem Soleimani, at the beginning of 2020, it may not be the same as before in 2019.

Before the killing of Soleimani, first Vice President, Yitzhak Jahangiri, had stated that the country’s total revenues during the past nine months of the current Iranian year, which began on March 21, amounted to $ 70 billion, through trade with the world, despite the current US sanctions conditions and, as quoted him by “Tasnim International News Agency,” expecting the volume of trade exchange to reach $ 100 billion by the end of the Iranian year on March 20, 2020.
However, his expectations today are linked to the direction of the development of events after the assassination of Soleimani, and that the tensions between Washington and Tehran and their allies, especially in Iraq, are entering a dramatic and dangerous escalation of violence in a region vital to the global economy, in this region extending from Iraq to the Strait of Hormuz through Saudi Arabia and the Gulf states, more than a quarter of the world’s daily oil consumption is produced and exported.

Since violence and the fear and its consequences constitute the most important factors determining the course of the economy’s development and its prospects, the coming days will be disastrous for the economies of the concerned countries and the world economy alike, in the event of exchange of military strikes between the United States and Iran, and in particular the American threat from President Donald Trump, who announced that the United States has identified 52 Iranian vital sites that will strike it if Tehran attacks any Americans or any American assets or its interests, which will be its stage in the Gulf countries and Iraq, especially the countries that depend in their economy to export oil almost completely, such as Iraq and Saudi Arabia, and those that are heavily dependent on operating their industry like China, India, Japan and other Asian countries, and which will surely search for strategic alternatives like LNG and shale derivatives that the United States has begun exporting to the European Union, India and China.

The higher the price of oil, the more the United States can compete in the market, by increasing its production of high-cost shale oil compared to the oil of Arab countries.

It is worth mentioning here, that American oil production recently reached record levels of about 13 million barrels per day, along with reserves amounting to about 500 million barrels, which means to enhance Washington’s ability to bridge any shortfall in the global market, not only for weeks, but for several months..
This is in line with President Trump’s relentless pursuit to enhance the role of fossil energy in the American economy, and to increase exports from it to the European and Asian markets.

With the continued suspension of Iranian and Venezuelan oil pumping, Washington’s chances are stronger than ever, on the way to occupying the position of the strongest player in the traditional energy market.

In the context of fears, anxiety has quickly reached Wall Street and other global markets where stock markets have fallen for fear of high energy prices, and with them costs of production and transportation, which means declining global trade, as well as the decline of US, European and Japanese bonds, and billions of dollars fled to safe havens like gold and other precious values, as for oil prices, it recorded an increase that reached more than three dollars a barrel of Brent crude, whose price jumped to about 70 dollars.

Iraq the most difficult confrontation:
In Iraq, which has become one of the most important oil-exporting countries, American oil workers and experts began to leave Iraqi territory, after the American State Department called on its citizens on January 3, 2020 to leave Iraq immediately, noting the stress of Iraqi authorities to continue pumping oil in an ordinary way and the continuous flight traffic at Baghdad International Airport does not reduce the negative repercussions of such a step .
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As for the Arab Gulf states, headed by Saudi Arabia, there are increasing fears that vital oil wells and installations will be hit by military strikes similar to the ones that hit Saudi Aramco in September 2019, and the strike that hit the Saudi company at that time suspended half of Saudi oil production for several weeks, the current production rate for Riyadh is about 10 million barrels per day.

Also, tensions raise the costs of transportation and insurance, in a way that has negative effects on the growth of the global economy, especially on China and the emerging industrial countries that depend on importing oil from the Middle East. In Germany, experts at major economic institutes warned of additional pressures on the economy and German companies that depend on export significantly.

Strait of Hormuz:
With the escalation of geopolitical and military tensions in the Gulf region, the talk about the security of the Strait of Hormuz is back , this time in a more difficult military situation, which restricts the movement of oil tankers, whether those declared or the secret hidden from the systems tracking the trajectory of international ships.

This prompted Britain to announce that its navy would begin escorting ships raising the British flag across the Strait of Hormuz, to provide protection for tensions between Washington and Tehran, knowing that London had to accompany its ships through the most important waterway in the world for oil shipments for a period of time last year, after the control of Iranian commandos on an oil tanker raising the British flag in the strait, after British forces detained an Iranian oil tanker near Gibraltar, accusing it of violating the sanctions imposed on Syria.

There is no doubt that the tension in the Gulf between America and Iran has now entered a new stage whose scenarios cannot be predicted, according to observers, especially if it took an offensive and revenge path between the two parties, which would cause Iran huge economic losses, and the economies of the region and the world would not be immune to its direct and indirect cruel results , especially in the event that the confrontation becomes open without restrictions.

We conclude that the political tensions between Washington and Tehran have made the economic climate in all of the Middle East region, especially in Iraq, Iran and the Arab Gulf states dark, pessimistic and unclear.

Economic Studies Unit
Rawabet Center for Research and Strategic Studies