One country must be quite pleased with the prospect of new U.S. economic sanctions against Iran’s oil industry, and this country is the largest oil importer in the world, and is Iran’s largest single oil client.
When China launched its long-awaited yuan-priced oil futures last month, it did so as part of its strategy to expand the international clout of its currency. Now, with U.S. sanctions on Iran’s horizon, the yuan could further advance down this road, as Beijing has vowed to continue buying Iranian crude, which will most likely be paid in yuan.
Iran should be on board with the idea. The country has made it clear even before President Trump’s withdrawal from the JCPOA that it would prefer to settle its trade in currencies other than the greenback, to which it has limited access.
Last month, Tehran and Moscow inked a deal to conduct all its business in goods rather than in dollars as both seek to reduce the influence of the U.S. currency on their economies. A month earlier, Iran banned settlement of import deals in dollars and ditched the currency in favor of the euro in reporting its forex reserves. In other words, Iran will be more than happy to take in Chinese yuan for its crude, or alternatively, to apply some oil-for-goods exchange scheme similar to the one agreed with Russia.
The point is that those one million barrels daily that new Iran sanctions are supposed to take off the market may not in fact be taken off the market. Analysts are citing this figure because that’s how much Iranian crude left global markets during the period when both the U.S. and the EU had sanctions in place against Tehran.
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