Sanctions

Since Russia’s 2014 invasion of Ukraine, Western powers have hit Moscow with economic sanctions, hoping to put a stop to President Vladimir Putin’s aggression. Have they worked?

With significant risks now looming over global energy markets, the United States should be careful not to go too far with oil sanctions.  

Iran appears increasingly boxed in by intensifying U.S. sanctions, the latest of which will effectively cut it off from its main oil customers.

Trump must not play security card in China trade war.

A move to block sanctions relief has been defeated, averting a likely spike in global aluminum prices but also spotlighting the tough road ahead for Congress in shaping policy on Russia.

Earlier this week Secretary of State Mike Pompeo announced that India, along with seven other countries, would receive an exemption from the newly-imposed U.S. sanctions on oil imports from Iran. This was a significant announcement. India is the second-largest importer of oil from Iran after China, and due to the volume of oil trade from Iran to India, it was always going to be hard to meet the Donald J. Trump administration’s demand that countries “go to zero” imports by November 4. The exemption recognizes this challenge, and acknowledges that India had already made “significant reductions” in its imports from Iran. The significant reductions exemption was good news from the perspective of U.S.-India economic ties, at least for now. The exemption isn’t permanent, of course, and just postpones for another six months the possibility of a confrontation over what the Indian government sees as unilateral sanctions (longstanding Indian policy recognizes only UN sanctions). This exercise will come around again in 180 days for a reevaluation, so the issue—and potential for bilateral tension—will linger.    The State Department further announced that India would receive a waiver for its continued work with Iran to develop the port at Chabahar. The language the the State Department provided to the press recognized that the Chabahar port serves as India’s bridge to Afghanistan and that the port is “vital” for India’s “ongoing support of Afghanistan’s growth and humanitarian relief.” Given that the Trump administration’s South Asia strategy formally calls upon India to scale up its economic assistance and development activities in Afghanistan, the sanctions exemption for Chabahar will keep this channel alive, although as C. Christine Fair has noted, the overall economic viability of Chabahar depends on a transport market to use this port. The exemption provides for strategic alignment between the Trump administration’s South Asia strategy and its Iran policy, and puts to rest what had been a hovering uncertainty about how the administration would approach the port. That’s the good news. In the not-so-great news, the trade dialogue with India appears to be hitting rougher waters. Washington and New Delhi have long had a laundry list of trade and economic frictions that have persisted over the years and are not easy to resolve. The Trump administration has added to that laundry list with new creations: tariffs on steel and aluminum leading to the prospect of Indian retailiatory tariffs, held in abeyance for now; a focus on trade deficit reduction; ending a series of trade preferences under the Generalized System of Preferences (GSP); and a bizarre presidential fixation on Indian tariffs on Harley Davidsons. These new frictions build upon an ongoing set of trade and economic challenges with India that any current or former U.S. government official would recognize well. As it turns out, these challenges have remained impervious to recent efforts to find solutions, and as a result, the U.S. trade representative (USTR), Robert Lighthizer, will not be traveling to India as earlier anticipated for the Trade Policy Forum (TPF), the standing dialogue between the USTR and his Indian counterpart. (The State Department had earlier issued a “Free and Open Indo-Pacific” calendar of meetings that slotted the TPF for October 31.) Press accounts at best put the possibility of a TPF convening in December or even January, due to the lack of progress in advancing issues prior to this dialogue. It’s worth remembering that, at the conclusion of last year’s TPF, Lighthizer decided to issue a statement commenting on “differing views that could not be resolved immediately” rather than sign onto a more typical joint statement, however anodyne. Previous administrations struggled to overcome big trade hurdles with India on a mind-numbing array of subjects—just look at the last U.S.-India joint statement from the final TPF convened with the Barack Obama administration. But at least the trade principals met regularly, and kept meeting. Economic issues with India are tough and won’t get any easier by postponing dialogue.   My book about India’s rise on the world stage, Our Time Has Come: How India Is Making Its Place in the World, was published by Oxford University Press in January. Follow me on Twitter: @AyresAlyssa. Or like me on Facebook (fb.me/ayresalyssa) or Instagram (instagr.am/ayresalyssa).

Renewed U.S. sanctions against Iranian oil exports kick in officially this week as part of the Trump administration’s decision to exit the Iranian nuclear deal. Estimations on how effective the sanctions have been is a relatively messy affair to date. Iran is expected to lose between 1 million to 1.5 million barrels a day in oil sales to Europe, Japan, South Korea, and India, with speculation that some of that oil might wind up instead in China or being repurposed in barter trade with Russia. Today, the U.S. government officially confirmed it was handing out temporary waivers to several of the countries that had previously announced intentions to go to zero purchases from Iran. Snatching defeat from the jaws of victory, the announcement, aimed to keep oil markets from overheating, calls into question the ultimate effectiveness of the Trump Iranian sanctions project overall. Worse still, it has simultaneously lay bare the fact that President Donald Trump, like countless U.S. presidents before him, has to worry about global oil prices in conducting foreign policy, despite an abundance of U.S. domestic energy. Iran has long experience in trying to avoid restrictions on its oil sales including turning off internationally-required tanker transponders to make it harder to track its shipping movements. But available satellite assisted tracking technology has improved since 2012, the last time the U.S. imposed sanctions on Iran. Tracking services are now offering up to the minute updates on Iranian oil exports, helping to illuminate the shadowy world of smuggling. One famous service, Tanker Trackers, even located with precision recent Iranian deliveries to China’s strategic petroleum reserve in Dalian. In years past, Iran has tried to entice major trading partners to evade sanctions compliance by promising sweetheart oil and gas exploration and other lucrative commercial deals. But the more uncertain long range commercial outlook for prolific Middle East reserves weakens Tehran’s bargaining chips. Fewer players, be they government-run firms or private companies, are looking to increase access to oil reserves in a place like Iran these days. After losing billions in investments in geopolitically risky international oil and gas ventures, China’s government has shifted efforts to new, clean energy technologies like renewables, batteries and automated cars. Europe’s big oil companies like Norway’s Equinor, France’s Total, and Royal Dutch Shell are also shifting to renewables and minding their knitting in places with less geopolitical risk. Also losing interest in risky international ventures, many American firms are squarely focused on new North American shale reserves that are now challenging the Middle East for market share. Many European, Japanese, and South Korean refiners initially responded to the Trump administration’s call for zero purchases of Iranian oil by quickly saying they would comply with the new U.S. sanctions, and French firm Total abandoned its natural gas development project in Iran. Ironically, all these pledged sanctions compliance announcements shook oil markets which were already tightening from a deal between the Organization of Petroleum Exporting Countries (OPEC) and Russia to limit supply to boost the price of oil. That prompted U.S. President Donald Trump to start tweeting at Saudi Arabia to intervene with more oil as they had done when then U.S. President Barack Obama had hardened Iranian oil sanctions in 2012 to get Tehran to the negotiating table. Had oil markets been oversupplied at the time the Trump administration was initiating new Iranian sanctions, chances are most countries would have begrudgingly gone along in a manner that would not have disturbed oil prices or added risk to the global economy. But in the context of a crisis-torn Venezuela and surprising reports that Saudi Arabia’s ability to produce more oil was more limited than previously supposed, the administration was faced with harder choices. Before offering its official statement on October 31, 2018, that “sufficient” oil supplies existed to permit a significant reduction in the petroleum purchased from Iran, the administration first jawboned Saudi Arabia to increase its production further, and then, in the aftermath of the Khashoggi scandal and related public U.S.-Saudi strains, the U.S. State Department was forced to hint that waivers would be given to countries having difficulty finding replacement barrels for Iranian purchases. Oil prices began to recede. In all, eight countries officially received such  temporary waivers, including Turkey, India and South Korea late last week. The waffling on sanctions enforcement has definitely helped with oil prices but it means that Iran will have an easier time finding outlets for its oil production, even if it can only take back goods as payment and not cash. Added oil supplies are expected on the market in early 2019 when infrastructure additions will allow higher exports of U.S. crude oil. U.S. diplomats are also working to free up more oil from northern Iraq and the Saudi-Kuwaiti neutral zone in the coming months. That Trump had to berate the Saudis and then capitulate on Iranian sanctions enforcement is a testament to the limitations of U.S. energy independence. Unlike in OPEC countries, additional U.S. oil export capacity isn’t just magically available on demand by pronouncement by government leaders. The pace of investment in new oil wells, export pipelines, and terminals is in a cacophony of dozens and dozens of independent, uncoordinated commercial oil company decisions that are dictated by markets and capital planning processes. Over the next month or two, rising U.S. oil production, which hit its historical record this month, remains stuck inland, constrained by pipeline bottlenecks. Even when those bottlenecks help keep the price of oil in Texas at a discount to international levels, it doesn’t help the Trump administration, which has to worry about how any shock in the global price of oil would disturb its broader goals that are related to the dollar, trade and global economic growth. That reality became even more apparent when Saudi Arabia hinted it could unsheathe its oil weapon after 44 years of quiescence, if the newly-elected U.S. Congress chooses to enforce the Magnitsky Act in response to the death of Jamal Khashoggi.  Reminding Americans of previous gasoline lines caused by the 1973 Saudi oil embargo, a Saudi commentator noted that the Saudi energy minister’s need to deny the possibility of a replay of 1973 signaled “to those who understand global politics that Saudi Arabia had many cards to play.” The incident laid bare an ugly reality: even with all our newfound oil and gas, America and its allies still need strategic stocks to protect the global economy from any rising petro-power that would try to use oil to blackmail the West into compliance to a political result they don’t want. U.S. production, though responsive to rising prices, is not able to surge rapidly enough to damp down a sudden supply shock. This was certainly noticed in China, which is only half way through building its own stockpile expected to reach 850 million barrels by 2020. China has increased its pace of stock building in the past few weeks, ironically with soon to be sanctioned Iranian oil. It is also a result that has taught a new generation of U.S. leaders about the limits of American oil power.

At many banks, Nov. 5 will be a scary day. That’s when broad U.S. sanctions are set to be re-imposed on Iran, thereby placing new pressure on its struggling economy and increasing the regime’s desperation for hard currency. A crucial side effect of this effort has gotten too little attention: Iran will likely attempt to skirt these sanctions through cyber-enabled money laundering — and banks will be a prime target. Cyber-enabled money laundering is a fairly simple concept. Hackers use a bank’s computer system to execute a prohibited financial transaction by altering critical information or disabling anti-money laundering controls. It’s effective because it’s subtle: One need only disguise the illicit purpose or sanctioned participant of an otherwise allowable transaction. Iran certainly has the motive for such attacks. Faced with a weakening currency and a looming recession, it is increasingly desperate to sell oil and obtain dollars to support its currency, finance trade, and fund terrorist groups and proxy wars overseas. Adding to the pressure, recent efforts by the U.S. and the United Arab Emirates have made it harder for Iran to conduct illicit activity through Dubai, its traditional backdoor to the financial system. Iran has also demonstrated the needed capabilities. Starting in 2011, it directed cyberattacks against dozens of U.S. banks, causing millions of dollars in lost business. More recently, its hackers stole at least 31 terabytes of documents and data from U.S. academic institutions, businesses, and government agencies, a theft valued at some $3.4 billion. Given the scale of its hard currency needs, Iran might seek help from other capable countries or criminal groups in conducting new attacks to evade sanctions. The finance industry is largely unprepared for this kind of threat. In recent years, it has focused on preventing large-scale hacks like the one that diverted $81 million from Bangladesh Bank in 2016. Due to its boldness and scale, this attack has been the subject of dramatic press coverage and innumerable cybersecurity sessions at financial conferences. But the window for this type of hack is closing as banks and regulators invest in better technology, monitoring and training to prevent unauthorized transfers of funds. Cyber-enabled money laundering isn’t yet on the radar in the same way, and it could prove harder to prevent. Hackers could subtly alter customer data to avoid sanctions-screening lists or exempt an account from the focused scrutiny that banks apply to clients from sanctioned countries. Bypassed controls at a bank’s far-flung branches represent a particular risk. Denmark’s largest lender, Danske Bank A/S, is facing civil penalties and possible criminal charges after its Estonian branch allegedly laundered as much as $235 billion on behalf of sanctioned Russians. Financial institutions aren’t powerless against this threat. But they must commit themselves to continuous monitoring of account behavior, data integrity, employees and supply chains.   For starters, they should invest in software that establishes an internal distributed ledger system to record critical data, which could make manipulation more difficult. Layering such a system with “context-aware” security features that take into account factors such as location, historical behavior, and multifactor authentication before allowing access or changes can help block anomalous activity. A combination of such features could allow administrators to spot hackers before their system controls have been defeated. A further concern is the manipulation of hardware, which can undermine even the most secure networks. Banks will need to audit their global supply chains to ensure the integrity of computers and network equipment. Storing data in secure clouds and accessing it through virtual desktops can minimize the amount of hardware that must be protected. Yet even the most sophisticated security systems can be defeated by the people who use them. Hackers will continue to use phishing and similar attacks to target careless users. Realistic training coupled with ongoing testing of cybersecurity awareness is essential. An insider threat program that monitors employees with critical access is also vital. Finally, better information sharing among banks, governments and academia would enable an attack against one institution to help inform all the others. An advisory issued by the Treasury Department on Oct. 11 detailing Iran’s efforts to abuse the international financial system is a good example. The resumption of broad U.S. sanctions sets up a serious threat of cyber-enabled money laundering by Iran. But it may also be an opportunity for financial institutions to redouble their cybersecurity efforts to avoid being on the receiving end of new attacks, as well as serious penalties if they’re used to evade sanctions. Financial institutions need to act now to protect themselves, their customers and their countries.

The United States has reactivated sanctions against Iran that could trigger the collapse of the multilateral Iran nuclear deal.

Navigating the geopolitical domain surrounding energy is always difficult, but in the lead-up to the U.S.-Russia summit in Helsinki, it is particularly complex. While energy is unlikely to be a first order item for the summit, a number of topics likely to be raised could intersect with energy issues. Senior Russian officials have been vocal about energy related items in the run-up to the July 16 meeting, perhaps hoping that recent oil market volatility will give Moscow a leg up to make the usual pitch about the positive role its energy trade can have in the bilateral relationship. Several energy related topics are likely front of mind for the American team traveling to Helsinki with U.S. President Donald Trump. Here are a few examples: 1. The United States would like Moscow’s help to restrain Iran’s expansive role in the Mideast because it believes that this would help U.S. regional allies and better enable the United States to exit costly conflicts in the region. The subject of the ongoing conflicts in Yemen and Syria is bound to come up at the summit, especially if the United States and Russia seek to open better lines of military to military communication between top U.S. and Russian military leaders. This consultative approach is considered critical to avoiding an accidental escalation of military conflict, the dangers of which have risen in recent years. For its part, Russia will argue it has offered some accommodation on the Iran issue and would like something back in return. First, Russia’s top diplomats announced Moscow wanted to see the withdrawal of all non-Syrian forces from Syria’s southern border areas. That move was taken as a betrayal by some in Iran where MPs accused Russia of being an unreliable partner that would willingly sacrifice Iran to bolster relations with the United States. Then Russia backed an agreement with Saudi Arabia and other oil producers including the Organization of Petroleum Exporting Countries (OPEC) to increase oil supplies. Iran was unhappy that Moscow showed its support for the oil producer agreement, especially given the context of the re-imposition of U.S. sanctions against Iranian oil export sales. President Trump made no secret that a Saudi-Russian agreement to raise oil production was the firm wish of the United States. But paving the way for the U.S. summit wasn’t likely the main reason Russia wanted to see oil prices stabilize at a lower level. Moscow had its own reasons to want to prevent a surge in oil prices. High oil prices make it harder for the Russian government to prevent ruble appreciation which would be bad for the Russian economy. 2. Arms control will be top of mind for the summit. The United States wants to signal its steadfast support for East Europe allies. This topic will trigger mutual accusations of violations in the Intermediate-Range Nuclear Forces Treaty (INF) treaty. While arms control will be a high priority topic, the back drop to any discussion of the INF and missile deployment will circle back to U.S. diplomatic support for Eastern Europe. That, in turn, could trigger a tangent to the United States’ open opposition to Russia’s Nordstream 2 direct natural gas pipeline expansion to Germany. Germany favors the expanded line to enhance its ability to bypass other gas pipeline transit countries like Poland, Belarus, or Ukraine, saying this will promote Germany’s energy security. The United States argues that the pipeline project, which would benefit Germany economically and strategically, could raise Europe’s dependence on Russian energy and weaken the Eastern European countries’ status vis-à-vis Russia as well as potentially shift needed income from the smaller Eastern European economies to to Germany. 3. The United States would like Russia to play a helpful role in negotiations for the denuclearization of North Korea. If past efforts are any indication, energy could be a piece of the economic package North Korea can hope to achieve through a peace treaty. Russia stands to be an important beneficiary of any energy deal that is part of the North Korean negotiations since one obvious option to North Korea’s energy problems could be a natural gas pipeline that would carry Russian natural gas via China to both North and South Korea. It’s not new for Russia to figure energy could be a constructive force to any U.S.-Russia relationship reset. Energy has been part and parcel of several U.S. attempts to improve relations with Russia in the past, as far back as 1993. At that time, the U.S.-Russia summit led to the creation of the Gore-Chernomyrdin Commission to promote economic and technological links, including energy. As part of that diplomatic process, the United States offered up American know how to help Russia revitalize its oil sector. ConocoPhillips was an early mover with its Polar Lights venture, but eventually it and other U.S. oil companies that entered Russia at the time found a host of legal, regulatory, and logistical barriers that turned profitable ventures into losing propositions. The failure of U.S. oil investing in Russia mirrored similar setbacks in U.S.-Russia arms control agreements. In the aftermath of the terrorist attacks of September 11, 2001, the United States and Russia revived their bilateral energy dialogues, after Vladimir Putin signaled that Russia was ready and able to help diversify global energy supplies away from the Middle East. In May 2002, President George W. Bush and President Putin initiated a new high-level dialogue on energy that led to several energy specific summits and new deals for American oil and gas companies in Russia. But soon after billions of dollars of fresh U.S. investment began flowing to Russia, the Kremlin began to renationalize its energy sector, and by 2005, U.S. companies not only faced difficult renegotiations of their oil and gas deals but in some cases, outright arrests of partners and the taking of assets. Obama era proposed resets similarly ran aground after Russia invaded Ukraine in 2014. The United States and Europe imposed sanctions on Russia in response, creating problems anew for the few U.S. oil companies that were still remaining on the ground in Russia. This time around, sanctions are top of mind when it comes to energy relations between the United States and Russia. Russian Energy Minister Alexander Novak visited U.S. Treasury Secretary Steven Mnuchin during his visit to Washington D.C. in late June. Reports say the meeting focused on sanctions, which for obvious reasons, the Russians would like removed, and the Nordstream 2 pipeline which Washington has threatened with possible new sanctions. Treasury, at the urging of Congress, has played a pivotal role in showing the Kremlin that it is not out of U.S. reach when it comes to economic levers. The United States targeted Russian aluminum firm Rusal and others with sanctions back in April to punish Moscow for malign activities, such as interference with U.S. elections, and amid suspicions that the Kremlin was behind the murderous use of nerve gas in the United Kingdom. The U.S. imposed April sanctions against Russia caused $12 billion in losses for Russia’s fifty wealthiest oligarchs. With both of Russia’s largest state-controlled energy companies, Rosneft and Gazprom, carrying huge corporate debt loads, further sanctions against those entities could be a major hassle for the Kremlin, which would be forced to intervene, possibly triggering more acrimony and rivalry inside President Putin’s inner circle.    From its side, Russia is likely to argue that it has been accommodating to U.S. priorities on Iran and oil prices and try to leverage those actions as evidence that the United States should offer concessions to its concerns. That means the United States will have to think carefully about how energy intersects with other priorities ahead of the summit because it will be tricky to both discourage Moscow from an aggressive posture on U.S. hacking, on military positioning in Eastern Europe, and on arms control and still reap the benefits of its cooperation in the Middle East and oil markets. Keeping items compartmentalized and in different buckets might seem feasible at first glance. The United States still achieved successful détente with the U.S.S.R. during the Cold War, for example. But as the U.S. summit with Russia approaches, better definition of priorities when it comes to energy will be necessary. Some items are already creating inconsistent messaging; for example, asking European nations to veto the Nordstream 2 pipeline to avoid over-dependence on Russia while at the same time, encouraging Russia to sell more oil to Europe to replace Iranian barrels and elsewhere to lubricate the oil market. Backing a Russian natural gas pipeline to the Korean peninsula could also seem untoward both to European advocates of Nordstream 2 as well as to U.S. exporters of American liquefied natural gas (LNG) who have been making headway lining up long term supply contracts to South Korea. The U.S. advance team to the summit will have to align competing interests to prepare more consistent messaging for Russia on these various energy elements, even if energy isn’t going to be in the top three topics for deeper discussion. Lack of clarity could muddy U.S. effectiveness in discussions or worse, leave Russia with geopolitical advantages it has shown it will exploit to divide the United States from its allies. Russia is likely hoping that energy exigencies will create an opening for it to gain concessions from the United States in other areas. The fantasy that Russia could somehow provide the United States a big lever against Iran in Syria and elsewhere may have initially clouded U.S. judgement over what is possible. Iran is unlikely to go quiet into the night, as it has made clear recently with threats against international shipping, regardless of how Moscow plays it. The United States needs to seek substantive discussion on other areas that don’t involve Iran, to avoid having the summit success reduced to empty promises on cooperation between the United States and Russia regarding Iran, when in reality, Moscow cannot likely impose sustainable constraints on Iran’s military actions, even if it wanted to. When discussing the topic of Europe, the United States should keep in mind China’s massive energy and other critical industry investment expansion into the continent. That could be a more fruitful topic that is putting Russian leaders on a back foot. To date, the real challenge to marketers of Russian oil and gas to Europe has not been U.S. LNG exports which are only just starting (U.S. energy sales to Europe are still a negligible volume compared right now to Russian natural gas sales which have been on the rise). It is renewable energy which is the bulwark of Europe’s energy independence from Russia. China could become the major actor in Europe’s clean energy future and that will influence both long run U.S. and Russian links to the continent as it has in Central Asia. The United States has been downplaying expectations for the Helsinki meeting, noting the fact that it is taking place is an improvement to escalating tensions. Preparations for a summit will likely force U.S. policy makers to square the circle on apparent inconsistencies in U.S. international energy diplomacy. Given the wary eye of Congress, the Trump administration is unlikely to offer Russia any sanctions relief until when and if Russia demonstrates substantive results on the ground. The United States should also be cautious about trying to orchestrate future participation of American oil and gas companies in Russia as a possible diplomatic carrot. The history of such initiatives is spotty at best, and it only takes one reckless unexpected action by Moscow to force Washington to press companies yet again to cut back on any progress on energy cooperation that could be made in the short run. A cautious approach to talk of energy cooperation would be wise at this juncture until more progress is made on higher priority issues.

At first glance, last week’s Vienna Group meeting—that is the Organization of Petroleum Exporting Countries (OPEC) plus non-OPEC producers including Russia—seemed to have resolved some thorny issues. The producer group confidently announced it would increase oil production to stabilize the global oil market. Iran, which had previously threatened to boycott any agreement in protest, appeared to acquiesce to the joint OPEC production increase communique. That may have seemed like a win for the Trump administration, which had hoped to box Iran in to the negotiating table on a host of issues, including conflict resolution in Yemen and Syria, when it cancelled the nuclear deal and reimposed sanctions on Iranian oil exports. Iran had suggested OPEC take a more strident stance on the U.S. policy. Not unexpectedly, U.S. Gulf allies, under pressure from U.S. President Donald Trump’s tweets and back door diplomacy, offered a moderate approach, which will include significant production increases by Saudi Arabia, among others. For those who might construe Iran’s relatively mild public statements following the OPEC session as a sign that Iran had no real cards to play, a glance at regional conflicts might indicate otherwise. Immediately following the OPEC meeting, Syria’s army, which has a history of on the ground collaboration with Iran, broke a standing cease fire agreement with the United States and Russia and advanced on the southern province of Daraa. At the same time, Iranian-backed Houthi rebels from Yemen fired missiles into the Saudi capital city of Riyadh. Both could be taken as a sign that pressure on Iran to deescalate its participation in regional conflicts isn’t producing immediate results, increasing the probability that the Trump administration will actively press allies to buy less oil from Iran.  These events raise important questions about what Tehran’s response will be in the coming days and months and what leverage the United States really has to alter facts on the ground. Granted, a twitter report suggested that Iran was unhappy with Russia’s collaboration with Saudi Arabia at OPEC and Russia’s stated posture on southern Syria. Ironically (or maybe not ironically at all) the whole complex situation could be an oil win-win for Moscow. Russia’s deal with Saudi Arabia to increase oil production achieves multiple benefits for the Kremlin. It demonstrates a willingness to consider U.S. interests but at a low cost to Russia. It helps preserve Russia’s long run influence on Saudi Arabia. And the chances that Russia will lose revenue as a result look slimmer, if Iran is dissatisfied with the situation. Russia is likely making a good bet that frustration in Tehran could lead to an escalation of Mideast conflicts, which in turn keeps oil prices lofty, giving Russia even more money since it is increasing its export volumes. A disappointed Iran could also be less apt to participate in conflict negotiations with the United States, leading to tighter sanctions enforcement, which ultimately reduces competition to Russian oil and gas companies from Tehran in long term natural gas markets for Europe. In recent weeks, French firm Total, which is likely pulling the plug on its South Pars natural gas project in Iran as a result of U.S. sanctions, ventured to Russia to sign a deal to participate in Novatek’s LNG-2 Arctic gas project. Europeans firms that are no longer active in Iran are also partners in the controversial Nord Stream 2 natural gas pipeline proposed to extend from Russia to Germany. That begs the question: What next moves make sense for Iran? The Iranian government remains under pressure from its own citizens, who took to the streets again in large numbers this week. But even with this intense internal pressure, it’s hard to see the logic behind the belief that the Iranian regime might simply just fold its cards on its regional ambitions. Even if Iran would consider reopening political negotiations with the United States and its neighbors to satisfy popular domestic sentiment—protesters have been chanting their government should spend more money at home than abroad—the ruling hardliners will likely want to gain negotiating leverage before doing so. That conflicts, for example, with the thesis that the battle for the Yemeni port of Al-Hodeida could set the stage for successful peace negotiations. Iran has many tactics at its disposal via its regional proxies and via asymmetric warfare that could be utilized to make its own interests appear more salient. Oil prices jumped back up again early this week despite reports that Saudi oil production is surging to 10.8 million barrels a day (b/d), partly on news of an oil production snafu in Canada. But realistically, that loss of Canadian barrels was small at 350,000 b/d and temporary through July. More likely, markets are jittery because it’s hard to construct a narrative on how Iran, Saudi Arabia, the United Arab Emirates, Israel, Russia, and the United States will navigate conflicts on the ground in the coming months.   

The idea of targeting President Trump's personal assets may be tempting, but it is the wrong approach.