The winner of the Iranian sanction is...China
It's not like you couldn't see this one coming.
Last week, right before Trump imposed new economic sanctions on Iran, Reuters posted this headline:
Iran oil sanctions could advance China's 'petro-yuan'
Guess what? They were right.
Trade in Chinese yuan-denominated crude oil futures has surged since President Donald Trump pulled the U.S. out of the Iran nuclear deal.
... But Trump's move to reimpose sanctions on Iran may have spurred interest in the Chinese oil futures. Last Wednesday, daily trade volumes in INE oil futures hit a record of over 240,000 lots, double what they were on Tuesday in Asia, before news of the renewed sanctions broke.
Oil market veteran John Driscoll told CNBC last week that Iranian traders have the option of trading in Chinese yuan-denominated crude oil futures on the Shanghai International Energy Exchange — circumventing any restrictions on dollar-denominated trade and U.S. banks.
China's Shanghai exchange is still a minor player on the global oil trading market, but the Iran sanctions are making it grow fast.
The share of yuan-backed crude oil contracts has soared to 12 percent of global trading since US withdrawal from the Iran nuclear deal, compared to eight percent in March.
China is the largest oil importer in the world, and is Iran's largest single oil client.
The idea of the sanctions was to make it impossible for Iran to sell it's oil, except on the black market at a big discount, but that doesn't appear to be an option any longer.
Iran was already in the process of cutting itself off from the dollar.
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.
It's another tiny cut in the long-term demise of the petrodollar.
The Iran sanctions, in addition to the Russia sanctions, are forcing Europe to consider the unthinkable - breaking away from the U.S.
Trump’s decision to pull the U.S. out of the Iran Deal has discouraged investments and has kept many European Union banks that were willing to lend to Tehran in limbo.
The European Union has also lost some $100.0 billion of export revenue because of U.S.-led sanctions against Russia.
The anger at Trump’s reversal of the Iran deal could trigger an unexpected show of pride and unity from the Europeans.
They could resolve to defy Washington on both Iran and Russia. They could even start to pull away from NATO to develop a more independent defense policy.