Angelo Katsoras, a Geopolitical Analyst at the National Bank of Canada, (NBC), explained that the re-imposition of U.S. sanctions has not only roiled Iran’s economy, it has placed the country in a very precarious geopolitical position.
Key Quotes:
“The more it strives to achieve geopolitical objectives and make life more difficult for the United States and its allies in the Middle East, the more likely its economy will continue to suffer.”
“The greater the economic duress, the more Iranians will ask why funds are being diverted from pressing domestic needs to finance foreign adventures. While we feel that a direct conflict between Iran and the United States remains highly unlikely, tensions between the two countries look set to worsen in the short term.”
“The United States will continue to squeeze Iran economically and Iran will likely strike back against the U.S. and its allies through its various proxies. The recent decision by Saudi Arabia to temporarily halt oil shipments through the Bab al-Mandeb Strait after Saudi Aramco reported attacks from Iranian-backed Houthi rebels on two oil tankers may already be an outcome of Iranian retaliation. Almost 5 million barrels of crude and refined petroleum products pass daily through this waterway to the Red Sea and onward to the Mediterranean.”
“Over the longer term, it is possible a combination of financial, political and limited military pressure will bring Iran back to the negotiating table. It is important to note that, despite its history of repression, the regime is more vulnerable to public opinion than the governments of many other Middle Eastern countries. Women tend to have more rights there than elsewhere in the region, and it is one of the few countries in the region to hold elections, however imperfect they may be. The supreme leader, who is selected by a body of 86 clerics, appoints the judiciary and the Guardian Council, which must approve all candidates for public office, including the presidency.”
“Finally, where the global oil sector is concerned, predictions that Iran’s oil exports could drop by as much as 1 million bpd leaves oil prices particularly vulnerable to further disruptions from other countries such as Libya, Nigeria and Venezuela, where OPEC estimates that production has fallen from 2.154 million bpd in January 2016 to only 1.34 million bpd in June. The IMF’s estimates that Venezuela’s economy has shrunk 45% since 2013 and that it will contract another 15% in 2018. This makes further reductions in Venezuelan oil production very likely.”
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