Sanctions on Iran: Ushering in the post-American world

The point to begin with is that China is continuing at this moment to buy large quantities of oil from Iran and have it shipped to China. An equally salient point is that the explanation for the cut in orders in the first month of 2012 was provided by the Wall Street Journal on 6 January: China and Iran have been negotiating a pricing dispute. In dealing with the state oil and gas companies of China and Russia, clients and partners run into this problem all the time. Russia has become particularly famous for stalling on purchases and deliveries during negotiations, but China does it too. If you want to understand how prices and deliveries will be negotiated in a world ruled by the oligarchs of the Asian powers, watch how they deal today with their global partners in the oil and gas industry.

But it’s not just that China is not on board with the sanctions against Iran. Russia, China, and India are all continuing to trade with Iran in various lines of commerce, including oil and gas, and are settling their accounts in currencies other than the US dollar (see here as well). They are simply avoiding the mechanisms – e.g., correspondent banks – through which the US and the EU are levying sanctions. Japan and South Korea, other major crude oil customers, have been noncommittal on sanctions; industry analysts predict they will make symbolic cuts in their orders from Iran, on the order of 10-15%, but will not cease buying entirely.

This is much bigger than the usual evasion shenanigans that come with economic sanctions. Frankly, Western political leaders are deceiving themselves if they believe Iran’s oil industry can be set on its heels with sanctions so porous. It is entirely possible that Iran will not have to sell any less crude than she has to offer. Instead of going to the EU, the oil would simply go to Asian nations.