This is the opposite of maximum pressure.
While we are at war with Iran, while Iran’s leverage in the war is its chokehold on the Strait of Hormuz, where its de facto blockade has suspended a fifth of the world’s oil commerce, the Trump administration has lifted sanctions on 140 million barrels of Iranian oil. At the currently inflated prices, this is worth about $14 billion to Tehran. The revenue will underwrite the Islamic Revolutionary Guards Corps’ continuing combat operations against the United States, Israel, and U.S.-friendly Gulf states — including the attacks and threats that have effectively closed the Strait.
Mind you: President Trump has been scathing in his criticism of President Obama — and rightly so — for the latter’s delivering pallets of cash and purported “interest on settlement of past claims” to the Iranian regime to seal the wayward Iran nuclear deal (the Joint Comprehensive Plan of Action) and ransom hostages. But the financial benefit to the regime Trump has just approved — while we are actively at war with the regime, pursuant to Trump’s initiative without congressional approval — is nearly ten times what Obama paid ($14 billion, compared to $1.7 billion).
How does this conceivably make sense?
According to Trump’s Treasury Secretary, Scott Bessent, it’s a narrow 30-day waiver, applicable only to oil shipments currently at sea. The theory is that releasing the 140 million barrels of oil to the open market will ease oil prices that are soaring because of the Strait stalemate. Bessent intimates that this is a win-win because, while the market gets fresh supply, the sanctions on Iran’s financial transactions will prevent the regime benefitting economically.
Color me skeptical.
About 90 percent of Iran’s oil goes to China. The transactions proceed in Yuan, outside the U.S. dollar-denominated financial system. The Trump administration has allowed these transactions to proceed through Iran’s shadow fleet — even though China is Iran’s patron and has provided it with weapons, intelligence, and financial support to fight the United States — because Trump (a) doesn’t want to draw China deeper into the war and (b) is hoping to strike some grand trade deal with Xi Jinping at a summit in the coming weeks.
The high likelihood is that the 140 million barrels are going to China, not the market.
Of course, oil is fungible, so the idea is that every barrel China gets from Iran is another barrel available to other buyers on the open market since China doesn’t need to buy it. This is the apparent theory behind Bessent’s claim that, rather than allowing China to “hoard” Iranian oil “on the cheap, the lifting of sanctions will have the effect of “unlocking this existing supply [of 140 million barrels] for the world” through global markets.
In practice, however, China is stockpiling oil. Hence, paying Iran for another 140 million barrels for its reserves (its storage capacity for which is vast) will not change China’s market behavior; ergo, the administration’s move is unlikely to relieve global consumption or otherwise change market conditions. Meantime, millions of barrels for the market are still stuck at the Strait.
At the rate oil is consumed, even if the secretary’s theory is sound, the price relief would last less than two weeks. But I don’t think the theory is sound, so even the goal of very short-term relief may be illusory.
Many supporters of the war are frustrated by the press coverage, such as the Wall Street Journal’s front-page headline today, “Iran Believes It’s Winning, Wants Steep Price to End War.” I support the war and the objective of dismantling the Iranian regime, so I sympathize with the frustration: By many warfighting metrics, our forces and Israel’s are crushing and decapitating the regime after just three weeks.
Nevertheless, when the administration makes a calculation, as energy prices continue to climb, that the best of the bad options available to it is to pour $14 billion into Iran’s coffers, one can grudgingly understand why Iran, though battered, doesn’t believe it’s beaten. And remember, all this happens just after Trump lifted sanctions on Russian oil despite its war of aggression against Ukraine in which its attacks on civilian infrastructure are persistent and brutal. The signal is unmistakable: For all his tough talk, Trump will make valuable concessions to our enemies if they disrupt financial markets and thereby raise public anxiety and opposition to the administration.
Regardless of whether the late Ayatollah Khamenei’s son and successor is himself alive and functioning, the regime is still intact and projecting power. That now includes missiles fired at the joint British and American base at Diego Garcia — an attack that, though unsuccessful, demonstrated ballistic missile capability it was not generally believed the regime had. That supports the president’s assessment of the threat Iran poses. But the regime can only be dismantled by maximum pressure against its ability to generate revenue. Letting Iran reap oil revenue is not maximum pressure but its opposite.