Commentary on Political Economy

Wednesday 17 April 2024



Biden Winks at Iranian Oil Exports

It's no secret the White House has been reluctant to stiffen sanctions against Iranian oil lest prices rise before the November election. The Administration has looked the other way as Chinese “teapot” refineries have imported an increasing amount of Iranian crude at a discount.

Iran’s oil production plunged after the Trump Administration withdrew from the 2015 nuclear deal and imposed its “maximum pressure” campaign. But during President Biden’s attempted rapprochement, Iranian crude exports have climbed by about a million barrels a day. That’s about as much as U.S. crude exports have increased under Mr. Biden.

China accounts for nearly all of Iran’s 1.6 million barrels a day in exports, providing Tehran with $35 billion to $45 billion a year to finance attacks on Israel and its network of terrorist proxies. This blood money also supports Iran’s production of drones, which Russia uses to attack Ukraine. China is a linchpin in this axis of terror, which it hasn’t tried to disguise.

Beijing never condemned Hamas’s Oct. 7 attack, and on Monday Chinese Foreign Minister Wang Yi called Iran a “comprehensive strategic partner.” The Chinese government also urged “influential countries, to play a constructive role in maintaining regional peace and stability”—meaning, the U.S. and Europe should press Israel to stand down.

The Administration’s failure to crack down on Chinese oil purchases reflects its larger deterrence failures. Biden officials including Ms. Yellen have admonished Beijing for solar panel and industrial exports that their labor allies dislike. Yet they have been less critical of China’s aid to Iran’s war machine.

Its sanctions have been pin-pricks with little tangible impact. Take the Administration’s export controls on U.S. technology to Chinese companies that provide components used in Iranian and Russian drones. The Administration keeps adding new entities to its blacklist in a game of whack-a-mole. Last week the Commerce Department finally added some more, noting “these components are used to develop and produce Shahed-series UAVs which have been used by Iran to attack oil tankers in the Middle East and by Russia in Ukraine.” What took so long?

The White House wants to keep U.S.-China relations calm through November. But its overriding concern is keeping global oil prices down so U.S. gasoline prices don’t spike in the summer.

Oil prices have been rising, but less than you’d expect amid global tensions. That may be because markets know there is considerable spare global oil supply that could come online relatively quickly if needed. Don Luskin and Michael Warren of Trend Macro note that Saudi Arabia and the United Arab Emirates have an estimated 4.5 million barrels a day in spare capacity owing to output cuts by the Organization of the Petroleum Exporting Countries since 2022.

Those cuts were partly a response to Iran’s surging exports. If Iranian exports decline, the Saudis and UAE might export more to take Tehran’s market share. U.S. frackers would also have more of a financial incentive to ramp up production.

By the way, the Administration would have more flexibility if it hadn’t drawn some 260 million barrels from the U.S. Strategic Petroleum Reserve to keep gas prices low during the midterms elections.

The House sanctions bill is a test of whether Mr. Biden is serious about punishing Iran for its unprecedented attack on a U.S. ally. The bill is aimed at limiting imports to China’s independent refineries. Democrats in Congress don’t want gas prices to rise anymore than Mr. Biden does, but keeping open China’s financing spigot enables Tehran to continue waging its terror campaign. This increases the risk of future supply disruptions.

Democratic Sen. Chris Van Hollen joined former GOP Sen. Pat Toomey in 2022 in backing legislation to impose secondary sanctions to limit Russian oil exports to China. But the White House didn’t get on board because it feared rising oil prices then too. The more Mr. Biden puts his re-election above national security, the less secure the U.S. and its allies become.


Journal Editorial Report: Bidenomics still has no answers for high prices. Images: Zuma Press Composite: Mark Kelly

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Appeared in the April 17, 2024, print edition as 'Biden Winks at Iranian Oil Exports'.

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