1001 Eurasian Days & Nights?
Most all of us know that One Thousand and One Nights is a collection of folk tales compiled during the Islamic Golden Age. This is a collection of works written over several centuries by many authors, translators, and scholars across West, Central, and South Asia as well as North Africa. Some tales themselves trace their roots back to ancient and medieval Arabic, Greek, Indian, Jewish, Persian and Turkish folklore. It takes place in regions now recently and popularly referred to as the Eurasian One Belt, One Road.
The main story concerns Shahryar whose name means ‘holder of the realm’ whom the story tells was a Sasanian king ruling broadly throughout Persia, India and China. He was shocked to learn that his brother’s wife was unfaithful; then discovering that his own wife was even more flagrantly faithless and kinky, had her sanctioned (killed).
In his bitterness and disillusion, he decides that all women are the same and deserving of a ‘final sanction’. Shahryar starts a routine of collecting and marrying virgins only to execute each one the next morning, before she has a chance to make a cuckold of him.
Eventually his vizier, whose duty was to provide fresh girls, could not find any more virgins. Scheherazade, the vizier’s daughter, offered herself as the next bride and her father reluctantly agreed. On the night of their marriage, Scheherazade begins to tell the king a tale, but does not end it. The king, curious about how the story ends, is forced to postpone her execution in order to hear the story’s end. The next night, as soon as she finishes the tale, she begins (and only begins) a new one. The king, eager to hear the conclusion of the story, postpones sanctioning her yet again.
This living on pins and needles goes on for 1,001 nights, until Shahryar weakens and realizes that carrying on terminally sanctioning virgins on a daily basis was getting stale, leading nowhere, and making no common sense.
Therefore, we fast-forward from Scheherazade’s time to October 2018. No virgins are slated to be ‘sanctioned’, after all the world has hopefully become more civilized. Nevertheless, the tale continues with other characters, so use your imagination.
If the United States was planning to crush Iran, its main advantage should have been sanctions against companies that buy Iranian oil. It is oil; whose exports in the peak months of the winter of 2017–18 reached 2.7 million barrels per day gives Iran the bulk of its foreign exchange earnings and most of its national income. Without the income from the oil trade, the Iranian currency would implode, and the country’s population will have to do without imported goods.
Such a situation should lead to the quick and acute impoverishment of the population, which, according to Washington, should develop into mass riots and, in an ideal beltway world, lead to the destruction of the hated Iranian regime. In short, Ali Baba’s treasure cave would be empty – game over, no magic lamps to rub or Djinns to the rescue.
Back in April of 2018, Tehran exported 2.3 million barrels per day, and this today is considered the baseline for assessing how effective US anti-Iran sanctions are. Ideally, by this coming November 4, the whole world is supposed to stop buying oil from Iran. According to sources in Washington, there is a view that should the actual export of Iranian oil fall to less than 1 million barrels per day, and then the sanctions will be considered a success as nothing is perfect.
There are not so many key buyers of Iranian oil: Europe, China, India, Japan, and South Korea. The amounts bought by other countries including Russia are relatively small. Moreover, Europe, China and India each purchase about a quarter of the volume of oil Iran can export, therefore the success of American unilateral sanctions largely depends on these countries kowtowing their support.
Japan and South Korea were the easiest for Washington. These two American allies quickly got the hint and already today have reduced the import of Iranian oil to almost zero, hoping no doubt that this will tip the scale in their favour regarding other US trade tariffs.
Add to that the purchases by those European companies that do not want to quarrel with the United States and therefore fall ‘into the clutches of Moscow’ are dropping into line quickly (Iranian oil on the European market is in any event being replaced by Russian). However, this is clearly not enough to achieve the desired storied result, or happy end.
As expected, America was ‘disappointed’ by China, although what other result could be expected when simultaneously with the anti-Iranian economic sanctions, Washington started a Trade and Tariff war against Beijing. To expect that China and Iran could or would not come to some separate bilateral agreement given the circumstances seems naive at best.
By the end of September 2018, China continued buying the same 0.6-0.7 million barrels per day from Iran. In October these volumes are increasing as Chinese companies must replace almost 0.3 million barrels per day of American oil, the import of which Beijing has stopped due to the heightening tensions caused by the American-Chinese trade and tariff imbroglio.
If India obeyed American instructions as expected, and refused to import Iranian oil, then conceivably Washington’s plans may have had a chance for success. It might well have been checkmate on Teheran. This especially as the economic ties between India and the United States in recent years have greatly strengthened. To threaten the pace of economic growth for the sake of principle, the Indians are clearly not in a position to do. In June, they publicly announced that they would bend to the will of Washington and by November 4, their imports of Iranian oil would stop.
However, by July, the position of India started to change rather rapidly and New Delhi announced that the decision to abandon Iranian oil was not final, and after a visit by the Iranian trade delegation announced they were not in a position after all to abandon Iranian oil. The Iranian’s must have made a very tempting offer that made economic sense.
Now we are in October, and just after President Putin’s visit to India, the two key oil companies in that country, Indian Oil Corp and Mangalore Refinery and Petrochemicals Ltd., announced that in November 2018 they would buy at least 9 million barrels of Iranian oil (0.3 million barrels per day).
At the same time, another key player in the Indian oil market, Nayara Energy (49.13% of which is owned by Russia’s Rosneft), will not abandon Iranian imports. Before the sanctions, its oil refinery bought up to 6 million barrels of Iranian oil a month. Today the volume has fallen to 4 million barrels, but judging from the latest announced plans of the company, by end November this year these volumes can and will be restored.
Rosneft has its own production capacities in Iran and receives a part of the oil produced there as its share. This oil is documented as Russian, and then sent on by tankers to India. This means that starting November-December 2018 the amount of Iranian oil to India will not differ from pre-sanctioned volumes, although ‘formally’ India will reduce its imports from Iran almost by half to appease Washington. Pragmatism and common economic sense seems to have outweighed unilateral sanctions for now at any rate.
All sides to this ongoing tale have incentives to give ground quietly – diplomatically – multilaterally. China as a balm to already stressed U.S. relations, Washington to avoid domestic oil price shocks. Nevertheless, the looming deadline does add more uncertainty to an emerging markets outlook that was fragile enough without it.
All of Iran’s big oil customers oppose its being blackballed again. This may improve to the benefit of Europe when and if they implement the planned alternative to the US dollar-centric SWIFT payment system, but that is unlikely this year.
China is in a far better position than Europe, Japan or South Korea to trade independently of the US and the dollar. China also now has experience-buying crude in its own currency, and a mechanism having established ‘petro-yuan’ contracts earlier in 2018.
So, will the new American anti-Iranian sanctions continue and destabilize Eurasia for a further 1001 days and nights? Not likely if the rest of the consuming world will not agree to be bound by US restrictions. That being said, will the US bow out of this story gracefully? Not likely, it doesn’t look like todays Shahryar and Scheherazade camps will kiss and make up anytime soon, so what are the alternatives? The choices, given the characters of this tale do not look diplomatic – we will doubtless learn in fairly short order what comes next. Maybe a suitable Djinn can conjure up three wishes, or even one.
Moscow. October 10, 2018