Trump’s Sanctions on Iran Tested By Oil-Thirsty China, India

[pinto + 293]

Shortly after U.S. President Donald Trump announced in May he would reimpose sanctions on Iran, the State Department began telling countries around the world the clock was ticking for them to cut oil purchases from the Islamic Republic to zero. The strategy is meant to cripple Iran’s oil-dependent economy and force Tehran to quash not only its nuclear ambitions, but this time, its ballistic missile program and its influence in Syria. With just days to go before renewed sanctions take effect Nov. 5, the reality is setting in: three of Iran’s top five customers – India, China, and Turkey - are resisting Washington’s call to end purchases outright, arguing there are not sufficient supplies worldwide to replace them, according to sources familiar with the matter. According to Reuters, that pressure, along with worries of a damaging oil price spike, is putting the Trump administration’s hard line to the test and raising the possibility of bilateral deals to allow some buying to continue, according to the sources.The tension has split the administration into two camps, one led by National Security Adviser John Bolton, who wants the toughest possible approach, and another by State Department officials keen to balance sanctions against preventing an oil price spike that could damage the U.S. and its allies, according to a source briefed by administration officials on the matter.

[PavelP + 15]

Iran’s oil can be replaced / it will not be easy, but decision is here..

[damirUSBiH + 327]

Iraq worried over oil trade with Iran as US sanctions loom

http://www.iraqdailyjournal.com/story-z17995333

[50 shades of black + 254]

Meanwhile, message from Iran - US cannot stop export of Iranian oil 

"Iranian IRNA news agency quoted Jahangiri(Iran’s First Vice President) as saying that “Iran has been exporting 2.5 million barrels of oil per day over the last few months and its export level has now declined by less than thousands of barrels”. The senior official pointed out that Iran can meet its revenue needs by exporting only one million barrels per day, adding that the country’s exports will not fall below this rate.The price of a barrel of oil used to be $30 and now it reached $80 […] Assuming that Washington will succeed in stopping the Iranian oil, the barrel price will hit $100,” he said."

[ThunderBlade + 231]

This is a "new" trend :

"Iran sold oil to private buyers through its energy exchange for the first time on Sunday, as part of its efforts to counter the imminent return of US sanctions. Only 280,000 barrels were sold out of one million offered, and went for USD 74.85 per barrel, more than USD 4 below the initial asking price. The identity of the buyer remained a secret, with the conservative Fars news agency saying only that a conglomerate of private firms had made the purchase through three brokerages."

[SERWIN + 749]

I want to see what actually happens if China and India just go ahead and purchase oil from Iran when the embargo goes into effect next month. Will we cut them off and refuse to trade with them? Because we all know that China does what China wants and they don't care about the rules. I think we should have cut them off years ago when we figured out that they just bypass rules and regulations when they don't suit China's ambitions. I think it would be difficult at first but I really believe we could do it, just cut China off and see how well their economy fairs without our billions of dollars flowing into the country. And to those investors with money tied up over there, sucks to be you. You shouldn't invest in a country that can change course overnight on a whim. Like a communist country...

[jaycee + 348]

13 minutes ago, SERWIN said:

I want to see what actually happens if China and India just go ahead and purchase oil from Iran when the embargo goes into effect next month. Will we cut them off and refuse to trade with them? Because we all know that China does what China wants and they don't care about the rules. I think we should have cut them off years ago when we figured out that they just bypass rules and regulations when they don't suit China's ambitions. I think it would be difficult at first but I really believe we could do it, just cut China off and see how well their economy fairs without our billions of dollars flowing into the country. And to those investors with money tied up over there, sucks to be you. You shouldn't invest in a country that can change course overnight on a whim. Like a communist country...

You do realize China holds 1.3 trillion of US debt. If it decides to sell it the $ will collapse bringing down the rest of the world economy, nobody would escape the consequences it would make 2008 look like a hiccup. It would only do this if the US was stupid enough to try and 'cut them off' and leave them with no option. The US needs China as much as China needs the US you need to see the full picture before you make rash decisions don't go down the line of Trump and assume there are no consequences to any actions.

So back to original point China, and to a lesser extent India, will continue to buy Iranian oil there is very little Trump can actually do apart from offer them a concession to make it look like it is he who is actually in control.

[Timothy Curl + 1]

Hello All,

I am enjoying this community very much!

Global1TC

 

[Dan Warnick + 6,100]

23 minutes ago, mthebold said:

Any chance Trump could turn this into a bidding war?  E.g. offering concessions to the countries that serve up the juiciest economic benefits to Trump's constituents?  

Oh yeah, all that's on the table.

 

23 minutes ago, mthebold said:

To whom, exactly, will China sell $1.3 trillion of US debt?  Then where will they put that $1.3 trillion?  Forced to sell at a discount and buy at a premium, I suspect they'd take a heavy loss, after which US debt would return to normal levels.  The real question here is, "Who would buckle first: China or the US?"  My bet is on the US.  At the discount China would have to offer, we might come out ahead buying it all back from them.  Win-win! 

This argument seems to be more in line with reality, from what I've read over time.  The reason I read about it in the past is still the reason for checking up on it now:  Because people continue to throw up the "What if China sells the debt?" question as if it can be put into play to China's benefit.  

China invests in U.S. Treasuries for the same reason as anyone else should: because it is the safest, most stable vehicle and place in the world to do so.  Not the EU, not Russia, not India or any other place.

And to @mthebold 's point: who are they going to sell it to?  More importantly, how is that going to hurt the U.S.?  Here is one article that explains this further, but there are scores of articles that break it down essentially the same.

America Owes China $1 Trillion - And That's Not A Problem For Anyone

Edited October 30, 2018 by Dan Warnick

[jaycee + 348]

2 hours ago, mthebold said:

To whom, exactly, will China sell $1.3 trillion of US debt?  Then where will they put that $1.3 trillion?  Forced to sell at a discount and buy at a premium, I suspect they'd take a heavy loss, after which US debt would return to normal levels.  The real question here is, "Who would buckle first: China or the US?"  My bet is on the US.  At the discount China would have to offer, we might come out ahead buying it all back from them.  Win-win!

Who buys US debt just now? Set the price lower than current debt people and countries will buy you don’t have to sell much just tell everyone you have $1.3 trillion you are selling and it will collapse the market. Same as the oil price if there is a large surplus on the market suddenly the market colllapses you don’t need to have immediate buyers. They will start selling the price will drop the more they sell the lower it goes. Off course it will be at a lower price that’s how you drive the $ down they will get less money back but when you take away all their trade they have nothing to lose and they have survived before in isolation they will survive again they know that not convinced America could survive with a step change like that almost overnight American banks would be wiped very quickly as would all banks worldwide. It’s not a case who would buckle first the if the Chinese are put in a position of nothing to lose they will do it. The US does not have enough in reserve to buy back the debt they owe too much as it is where would they get the extra $s? Printing more will just devalue the currency further.

[Dan Warnick + 6,100]

10 COUNTRIES THAT OWN MOST U.S. DEBT

1. Mainland China ($1.18 trillion)

China has topped this list almost exclusively since 2008, briefly losing the top spot twice to Japan, according to CNN. One of those moments came in 2016, as China sold off U.S. Treasuries, then used those dollars to buy its own fading currency, the yuan. While some worry that it’s harmful for China to hold this much economic leverage over the U.S. given the adversarial political climate between the two nations, some analysts believe it makes the two countries more dependent on each other.

As Forbes points out, while some are concerned that “China will dump all of these Treasuries at some point and crash the U.S. dollar, riding disaster to international supremacy. … there is no way China could unload U.S. debt without it ruining its own economy.” Still, the potential for trouble exists when a country has such a huge stake in American debt; earlier this year, financial analysts expressed concern about a report that Chinese officials were considering slowing, and possibly stopping, the purchase of U.S. Treasuries.

Edited October 30, 2018 by Dan Warnick

[Dan Warnick + 6,100]

5 Misconceptions About The $20 Trillion Of U.S. Debt

Misconception 4: China owns "too much" of our debt.

Who owns the debt issued by the United States? The answer is just about everyone. The roster of our debt holders includes; a majority of the world's nations, institutional investors, individual investors, pension funds, the Federal Reserve, and, oddly enough, our own government balance sheet.

Over the course of recent history, Chinese manufacturing and exports have become in high demand for the developed world. This has resulted in China becoming the most significant trade partner for the United States, resulting in around 15 percent of our annual trade. But our trade with China is far from equal. In fact, we import from China significantly more than we export to them. This trade imbalance leaves China with a significant amount of surplus dollars in their system (due to their exports being sold to the US in dollars but not enough imports being brought in to offset this amount).

As these dollars are exchanged for local currency through the Chinese banking system, the central bank is left with surplus dollars that must be held somehow. Exchanging these dollars for US debt is the most efficient use of these dollars as it effectively allows the return of these dollars to the US while at the same time hedging some of the nation's trade by holding investments which pay the country back in the currency with which that trade is conducted in.

China holds about 5.5 percent of our outstanding debt. In comparison, during multiple rounds of quantitative easing to combat the Great Recession, our Federal Reserve bought around $2.8-trillion of our nation's debt, compared to China's holding of $1.1-trillion, amounting to 14 percent of our outstanding debt.

What does this all mean? In effect, our own Federal Reserve Bank has 2.5-times greater influence and effect on our debt situation and yet these two parties still account for only 20 percent of the total debt outstanding.

This means that in all reality China, though topping the list of foreign holders, is not any more nefarious in its owning of our debt than our own central bank.

[jaycee + 348]

6 minutes ago, Dan Warnick said:

What does this all mean? In effect, our own Federal Reserve Bank has 2.5-times greater influence and effect on our debt situation and yet these two parties still account for only 20 percent of the total debt outstanding.

This means that in all reality China, though topping the list of foreign holders, is not any more nefarious in its owning of our debt than our own central bank.

With any market the price is set at the margins put $1.3 of debt on the market and it will fall any other outcome is wishfull thinking.

[BHUPINDER KUMAR + 6]

In my opinion India will continue to buy from Iran.. i firmly believe that this whole ball game is more of a mind game rather than economics