Trump’s Iran-China trade war gamble surprises, paying off in short-term - Analysis

According to this quiet logical argument, Trump would have to pick which trade war he could succeed in winning: China or Iran.

By
June 10, 2019 20:33
4 minute read.
Trump’s Iran-China trade war gamble surprises, paying off in short-term - Analysis

US President Donald Trump waves to the media before boarding Air Force One in Maryland on April 27. (photo credit: YURI GRIPAS / REUTERS)

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analysis from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later

Five hundred thousand disappeared barrels of oil per day and the number 6%.

Those two statistics tell the surprising story of why the Trump administration’s multi-front trade wars with China and against Iran seem to be paying off against the Islamic republic, at least in the short term.

This was not what was expected. China was expected to continue to import oil from Iran even in the face of US sanctions. If anything, the fact the two countries were already sanctioning each other was expected to make Beijing less concerned about additional Tehran-related sanctions.

Due to this view, top Israeli and US officials and economists had all said that if Trump continued his trade war with Beijing that it would damage the sanctions campaign against Iran.

According to this quiet logical argument, Trump would have to pick which trade war he could succeed in winning: China or Iran.

Because of this, Israel preferred that he settle the China trade war a long time ago, so that there would be no distraction from the focus on the Islamic republic.

Israeli fears were that at some point China would offer the US more favorable terms in the two countries’ broader trade dispute, but that the price would be Trump permitting Beijing to quietly continue to buy oil from Tehran.

China is a massive oil importer and places a very high value on having freedom to import from as many sources as possible.

 It seems the experts underestimated the fear the Chinese have of an open-ended trade war with Trump as well as the imbalance in the China-Iran relationship.

Iran exports around 500,000 barrels of oil per day, which is down from an economic forecast not long ago of hoping to import between 1 million to 1.5 million barrels per day.

China was supposed to take an additional 500,000 or likely more barrels per day at least, making up potentially half of all Iranian oil exports.

Those 500,000 barrels per day, which have disappeared over the last month, mean there is no more important country to Iran than China.

But the reverse is not true.

The Islamic republic is an important trade partner and oil importer for China, but at the end of the day, even with no sanctions, it only provided Beijing with 6% of its total oil needs.

China always had to do business with many other countries to fulfill the other 94% of its oil needs.


So Iran just is not as important to China, and nowhere near as important as resolving the broader trade dispute with the US favorably.

 

FOR THESE reasons, China which lashed out at US sanctions and said it would ignore them, is quietly playing ball with Trump on sanctions against Iran.

This, more than any other issue, may be why Tehran is feeling the pressure more this time and tried to set a 60-day deadline for the world to help its economy improve lest it decide to exit the 2015 nuclear deal.

On Sunday, Iranian Oil Minister Bijan Namdar Zangeneh reportedly told the Iranian parliament that the country has “unofficial or unconventional sales, all of which are secret, because if they were made known, America would have immediately blocked them.”

The bluff could not be more obvious.

In the same speech, he admitted that in the past month China has stopped buying oil from Tehran and that multiple other countries who were buying Iranian oil through April were not returning his phone calls.

India and Turkey, both top candidates for trying to circumvent US oil sanctions on Iran, have also quietly stopped purchasing oil from the Islamic republic.

Reportedly, Iran already has around 20 million barrels of oil which have nowhere to go sitting around on ships.

Iran’s oil minister’s desperation sounded a lot like Hezbollah’s Hassan Nasrallah publicly threatening Israel periodically with military conflict, while cowering in a hidden hole in the ground and staying out of the many rounds of fighting between Israel and Hamas.

In other words, Trump’s multi-sided trade war has Iran boxed in far more than it or anyone else expected, and any positive message he is giving the parliament is likely a weak attempt at maintaining their national morale on the issue.

Of course, China may decide to quietly try to circumvent the sanctions at a later date when Trump’s attention is elsewhere.

And no one still has a clue about what point, if any, the maximum pressure campaign will get Iran to negotiate a new nuclear deal on terms which Trump and Israel want.

Yet whatever happens down the road, and ignoring what negative impact the US-China trade war may have on the US economy, it turns out to have surprisingly played to Israel’s advantage in ratcheting up the pressure on Iran by getting China to drop its Iranian-oil purchases.

Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>

Related Content

June 26, 2019
Book review: The Arab world’s innovation ecosystem

By AVI JORISCH

Cookie Settings