EU Busts Iran Sanctions. Dollar No Longer Reserve for Oil Trades
In a surprise move, the EU special purpose vehicle for trade with Iran (INSTEX) exercised its first trade today. The body was set up to facilitate exports of Iranian oil without U.S. dollars, avoiding a sanctions regime imposed unilaterally by the U.S.
Instex is now operational despite U.S. threats to European banks and officials of reprisal sanctions if they violated Iran sanctions.
Bloomberg had reported on May 7 the Treasury Department’s undersecretary for terrorism and financial intelligence, Sigal Mandelker, issued a warning letter that Instex and anyone associated with it could be barred from the U.S. financial system if it goes into effect.
In defiance of U.S. pressure, Instex was set up by EU diplomats in January as a means to prevent total collapse of the Iranian nuclear deal, officially called the Joint Comprehensive Plan of Action (JCPOA). The first official trades occurred today, in the shadow of the Group of 20 Summit meeting. https://www.thenational.ae/world/europe/eu-claims-iran-deal-held-togethe...
A senior EU diplomat has said the first transactions were being made by a special purpose vehicle for trade with Iran at a meeting of the remaining members of the 2015 nuclear deal in Vienna.
Friday’s meeting in Vienna featured “constructive discussions,” Helga Schmid, the head of the EU diplomatic service said, confirming the entity, named Instex, was making its first transactions.
“INSTEX now operational, first transactions being processed and more EU Members States to join. Good progress on Arak and Fordow [fuel enrichment] projects,” she posted.
The Instrument in Support of Trade Exchanges (Instex) is designed to facilitate trade of essential goods, such as food and medicine, mainly from the EU to Iran. A Chinese official said Beijing was open to using the facility.
The platform has been set up in France, with a German managing director in a coordinated European effort to counterbalance the US economic power displayed by its sanctions policy.
President Donald Trump last year pulled out of the Iranian nuclear deal, officially called the Joint Comprehensive Plan of Action (JCPOA), which curbed Iran’s nuclear activities in return for the lifting of sanctions.
According to today's report:
As the talks kicked off on Friday, seven EU nations expressed support for Instex and the JCPOA, asking Iran "to abide by and fully respect the terms and provisions of the nuclear agreement".
"We are working with France, Germany and the United Kingdom, as well as with the European External Action Service and the European Commission, to establish channels to facilitate legitimate trade and financial operations with Iran, one of the foremost of these initiatives being the establishment of Instrument in Support of Trade Exchanges," read the statement from Austria, Belgium, Finland, the Netherlands, Slovenia, Spain and Sweden.
Whether the declaration of support and first tranche of transactions will be enough to keep Iran committed to the 2015 nuclear deal is still in question.
Comments
Allelujah.
Two pieces of good news in two days, Tulsi Gabbard winning acknowledgement and respect in the debate, and this encouraging sign from Europe. A person could almost get used to thinking common sense is gaining ground. Thank you, leveymg, for posting this.
Here's more on how INSTEX works free from Dollar exchange
While major US media have so far ignored the story (anyone here surprised?), Deutsch Weldt (DW) confirms the report that INSTEX started operations today. https://www.dw.com/en/eu-mechanism-for-trade-with-iran-now-operational/a...
A linked background article explains how the special exchange will bypass U.S. sanctions and the U.S. currency controls over oil exports to Europe: https://www.dw.com/en/opinion-eu-taking-a-stand-through-legal-trading-wi...
Best thanks for this reporting
Your byline underlines for me the seriousness of your analysis. How unexpected was this probe of the petrodollar area?
The demise of the petrodollar was a consequence of secondary
sanctions. Goodbye and good riddance to the petrodollar! Time for the gold standard? Time for the withering of the Fed? With the end of automatic indebtedness necessitated by the Fed banksters taking their cut right off the top of every buck they print, we might come to a more market-based economy--whatever the heck that means.
I agree with Linda....two positive things...
I don't know if we can handle it.
"Religion is what keeps the poor from murdering the rich."--Napoleon
thanks for bringing
this news. earlier today (yesterday?) i'd grabbed this link at RT.com that includes this baffling part toward the end, with zero citation, i'll add:
i do remember tehran had complained earlier (as the EU dithered) that it wasn't operational, and when it was so, it would mainly be for medicines and...food (?)
If this is another Oil for Food thing, it's a nonstarter.
Right now, it's unclear which way this is going to go. If Europe bows to American power, again, it will turn out very badly for everyone. Iraq times ten.
India has been trading with Iran
...just fine. India pays Iran for oil in gold. Europe would be smart to convert to the Yuan/gold convertible bond as a trading currency to use with Iran, and hold reserves in that. It's redeemable for gold at many settlerment banks around the world. It was designed as a trading currency to use outside the SWIFT system. All the groundwork was painstakingly laid just for this purpose.
Food for oil. What an insult.
Europe wants it both ways. They should grow up and start leading the world instead of hiding behind Uncle Sams petticoat.
[edited to correct]
IMAGINE if you woke up the day after a US Presidential Election and headlines around the the world blared, "The Majority of Americans Refused to Vote in US Presidential Election! What Does this Mean?"
dunno exactly what it
is at this point. india may buy oil from iran with gold, but iirc (not likely) in a recent diary of mine i'd quoted pepe escobar saying that modi didn't attend the SCO ? meeting, remembering he'd forgotten a haircut appt. at the last minute, and would likely join a 4-letter acronym USian trade and military alliance instead. small wonder.
and of course modi has sent ships into the gulf of oman to protect their cargo ships form the evil terr'ists iranian nat'l guard navy. i really would hate to take the time to look back at my recent threads, but if that fuzzy memory shite is too much for you...i will. i'll even try not to ask for payment. ; )
i'm torn between writing up more about iran, allies, not...or the f'ed up 'prosperity to peace I/P 'deal' in bahrain, or: 'billions for bupkus'.. same authors either way. i'm kinda waiting for permission to reblog a whole essay by an arabic man, but he reckons i need to ask the CP editors, dunno why that is.
had time until
permission came in. escobar:, as part of the opening to my 'cooperation is better than competion' post, as in the western imperium forcing new alliances ever-more rapidly. no, not many read it, but then: 'debates', i guess.
"Yet unlike Beijing and Moscow, New Delhi refuses to unconditionally support Tehran in its do-or-die fight against the Trump administration’s economic war and de facto blockade.
Modi faces a stark existential choice. He’s tempted to channel his visceral anti-Belt-and-Road stance into the siren call of a fuzzy, US-concocted Indo-Pacific alliance – a de facto containment mechanism against “China, China, China” as the Pentagon leadership openly admits it.”
today: India’s new government will loosen ties with Iran, asia times
thugs love thugs.
this is excellent news ...
i'll throw in this bit that i read today which i think might make this a breakthrough:
Be careful what you wish for.
Doing all oil business in dollars is the only thing holding up the dollar.
Trump is a bull in a china shop. Someone will have to pick up the pieces and it won't be the one percent. YOU and I are expendable.
I've seen lots of changes. What doesn't change is people. Same old hairless apes.
I probably should not weigh in here
because I do not have a good grasp of how international monetary policy works, but fools (me) rush in. The petro dollar has long been a Ponzi scheme that, in all probability , will collapse sooner or later. I think everyone here accepts that if the petro dollar does collapse, it will bring about difficult times for most Americans. The problem as I see it is that the American people are being bankrupted by endless war and the ever growing fleecing of what is left of the middle class. We are going down the tubes already. I think a lot of us see no way out other than for the entire scheme to collapse. If this is a precipitating factor towards that collapse, then so be it.
To be honest, I am beginning to think the rest of the world is tired of being bullied by American hegemony. Sooner or later all empires must fall and I have said in the past that I believe the demise of the American empire will be a financial collapse. Maybe the EU is finally deciding to try to take control of their own future and this will be the straw that breaks the back of the increasingly fragile American empire.
Like I posted above, I may be totally wrong with my personal take on this, but something has to give.
Do I hear the sound of guillotines being constructed?
“Those who make peaceful revolution impossible will make violent revolution inevitable." ~ President John F. Kennedy
Let me take a stab at it...
Without demand for US dollars for international trade, the dollar would drop. That makes US exports cheaper, makes goods manufactured in the US cheaper (encouraging manufacturing jobs to return to the US), and makes US debt less attractive. Interest rates on Treasury securities would have to go up, which in turn raises all interest rates. Given the level of indebtedness by the US proletariat, that would be bad news. I think it's still worse news for our neoliberal overlords. The smoke and mirrors recovery has been built on near zero interest rates. Higher interest rates will bring higher default rates on loans which blows up the derivatives market. The stock market drops whenever interest rates rise. Fracking is only financially viable with near zero interest rates, drilling of new wells to be fracked would cease almost immediately, and the existing wells deplete within a year or two.
If this could all come down before the election, Trump would be leading the worst crash in the economy in a century. So there's that.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Albert Bartlett
"A species that is hurtling toward extinction has no business promoting slow incremental change." -- Caitlin Johnstone
Thank you.
I am a babe in the woods with this stuff, so I hope others will weigh in on it.
My take is that no matter what happens, the American people will definitely suffer, at least in the short term. But long term, the world will probably be better off and hopefully the American people will too.
Do I hear the sound of guillotines being constructed?
“Those who make peaceful revolution impossible will make violent revolution inevitable." ~ President John F. Kennedy
The idea is to choke Iran oil inflating global crude prices
The primary domestic economic beneficiaries of the Iran embargo are US oil brokers and producers (Exxon, et. al) that hold crude supply contracts and their regional "ally," Saudi Arabia. The embargo has a major negative impact on China, which has been importing 25% from Iran and VZ.
The result of simultaneous embargoes on Iran and VZ are increased "risk premium", which equates to extra dollars in the pockets of Wall Street and Chicago commodities traders and the banks attached to oil contracts and futures. The financial industry trends to like sanctions and threats of war because uncertainty and risk create froth - an appetite for hedging products -- in the derivatives markets. It also creates extra costs for the end consumer. That's dollars out of the pockets of the public, who pay more for gas at the pump and heating oil along with other energy supplies, as prices for alternatives tend to track oil upward.
Because oil and energy is globally traded, increasing domestic production does not result in proportional downward price cuts at the pump. Cheaper oil (and other energy sources) is a net income transfer to the consumer, so sanctions on producing countries is a cost paid by the middle-classes. A stronger dollar also makes all imported goods cheaper, but makes U.S. exports less competitive. Because we import so much more than we export, a weaker dollar would hit consumers harder while U.S. exporting companies would stand to gain.
As for the impact on interest rates, the Treasuries market is already inverted which points to a recession. The Fed's reserves are down 40% since 2016, as China and other foreign investors have been selling off Treasuries amidst a massive rise in federal debt brought on by upper-income and corporate tax cuts. The U.S. public balance sheets are far more precarious than most are aware. A trade war with China, the biggest foreign holder of US debt, is happening at exactly the wrong time, as the Fed requires foreign infusions of funds to stabilize and continually bail-out the U.S. banking system with low or negative real interest rate infusions through the Overnight window and Repo Markets.
I agree, a significant breakdown in the artificially inflated Dollar trading system would have a downward cascading effect on multiple markets and a big impact on the U.S. economy. The creation of an alternative to the Dollar as the reserve currency, however, provides an alternative to the rest of the world economy which would otherwise collapse along with it.
Re interest rates
I laugh at 2.5% being considered "high" on Wall Street.
For reference:
The fed funds rate reached a high of 20% in 1979 and 1980 to combat double-digit inflation that began in 1973 after President Nixon disengaged the dollar from the gold standard. Inflation tripled from 3.9% to 9.6%. The Fed doubled interest rates from 5.75 to a high of 11 points. Inflation continued to remain in the double digits through all of 1974. It lasted until April 1975. The Fed kept raising the fed funds rate to a peak of 13 in July 1974, and then dramatically lowered the rate, reaching 7.5 by January 1975.
Not "tripled" by the arithmetic I was taught. And 13 is lower than 20.
Remember this is the base interest rate. Consumer rates were sky high and many businesses collapsed including International Harvester where I worked. IH was rolling over 30 and 60 day paper a "financial innovation" like mortgage derivatives. Their debt interest rates went over 30%, then they couldn't place it at any rate and had to declare bankruptcy. It didn't help that their customers, farmers and shipping companies were also broke. In the case of the farmers it was because the government had encouraged them to borrow and mortgage to bring more land into production. Broke farmers don't buy six figure machines. In the case of the transport companies, the staggering cost of fuel had to be a factor and they weren't about to borrow at those rates to buy new trucks. About all we could sell were factory engineered kits to convert gasoline-powered trucks to diesel. Nicely done as only the OEM can do. They sold like hotcakes. A $6,000 kit IIRC, compared to a $200,000 truck.
This author blames the inflation on leaving the gold standard, a favorite Conservative hobby horse.
The real reason IMHO was the Arab Oil Embargo:
By the end of the embargo in March 1974,[2] the price of oil had risen from US$3 per barrel to nearly $12 globally; US prices were significantly higher.
Try making gas prices go from $3.00 to $12.00 or higher today and see what happens to inflation.
I've seen lots of changes. What doesn't change is people. Same old hairless apes.
reuters:
an anonymous iranian official' says.... reuters claims:
the bolded seems to be correct, but i'd thought iran had included food, and not being sure that's why i'd added the '?'
anon official continues:
and reuters writes that iran will keep further uranium enrichment, which was the stick they'd claimed if sanction waivers weren't extended...or ended.
but yeah, with so many conflicting claims, including 'anonymous officials', will we know what happens/happened in vienna? i've lost track.
This is a very good thing for everyone.
And very good news for the American People. Maybe now they can have some nice things.
The sooner the US takes a seat at the table with the other superpowers, the better. Together, they have important decisions to make about the planet.
Headlines read: "Robots Will Displace 20 Million Jobs By 2030." Andrew Yang is the only candidate in the race who knows exactly how to turn that into a windfall for the American people. The Dems are not up to speed on much that's going on in the world. They've been stupified, and it shows.
IMAGINE if you woke up the day after a US Presidential Election and headlines around the the world blared, "The Majority of Americans Refused to Vote in US Presidential Election! What Does this Mean?"
Sorry I can’t celebrate
Making it easier to mine and burn fossil fuels.
We can’t save the world by playing by the rules, because the rules have to be changed.
- Greta Thunberg
Oil fever: Israel-Palestine offshore, Golan, Cyprus, East Timor,
South China Sea, etc. etc. . . .
If G20 countries were serious about addressing global warming, you’d think the push would be to leave it all in the earth’s crust, wherever it is, and look for some other path, not even to prosperity, but merely towards biosphere stability.