COMMENTARY – Trump goes after Iran; his move seen impacting geopolitics more than oil

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Screenshot of U.S. President Donald Trump's speech on the Iran nuclear deal.

American President Donald Trump has officially decertified the Joint Comprehensive Plan of Action (JCPOA) Iran deal, while hitting Iranian power players—especially the Islamic Revolutionary Guard Corps (IRGC)—with a new list of sanctions.

Trump’s long-awaited statement on his confrontation with Iran could cause a watershed in the regional power structure of the Middle East.

The new strategy toward Iran is largely designed to target Tehran’s main power player, the IRGC, a branch of the armed forces that controls between 30-60 percent of the country’s economy via ownership of many businesses, including some in the oil industry.

Trump’s decision will also impact America’s European partners. The majority of European countries still want to support the JCPOA, as European partners try to protect the multibillion-dollar deals between European companies and Iranian counterparts.

However, the US president’s hardened stance on a multinational nuclear deal between Iran and six major powers will not have much impact on global oil prices, Iranian Oil Minister Bijan Zanganeh told state TV on Sunday.

For the oil market, the situation does not mean any lost barrels for now, but it does create an air of uncertainty.

Analysts expect China to ignore the sanctions, and perhaps add more oil imports from Iran. Both Japan and South Korea will probably be cooperative, potentially reducing their imports from Iran by 500,000 barrels a day.

Until now, Trump’s rhetoric has been mostly symbolic, leaving enough room for discussions between Washington and his EU partners. This latest statement, however, has upped the ante, with the Washington administration targeting the imposition of full economic sanctions, leaving less room for Iran to access international trade and finance options.

In a long address, Trump painted a picture of Iran as a supporter of international terrorism, destabilizing the region, especially in Syria, Iraq and via its proxy Hezbollah. At the same time, he questioned the rationale behind the lifting of sanctions and allowing Iranian financial assets to be repatriated to Tehran.

According to Trump, the Obama administration allowed over $1.5 billion of blocked reserves to be transferred to Iran and used for military expansion and international armed conflict in Syria, Iraq and Yemen. He declared that Iran’s official enemies are still the U.S. and Israel, and reserves should be blocked.

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