Tuesday’s Nation and World Section of the Cavalier Daily
contained a significant article taken from the Washington Post
concerning Iran and its decision on with whom it would be sharing its precious oil. Steven
Mufson and Robin Wright detailed the present sway of Iranian interests from
trade with the Western World to the Eastern world, most notably China. The
reason for these actions seems to be the result of new United States
sanctions creating record high oil prices. Up until now, Germany and other European countries have been
the leading trading partners of Iran,
yet analysts expect to see a transfer towards China. Iran has been recently found to have been doing most of its transactions in euros
and yen hoping to shield their customers from the problems created by the U.S. sanctions.
Despite all its efforts, U.S. sanctions are putting a lot of pressure on not only Iran but other nations. The U.S.
Treasury stated that up to 40 banks have been forced to stop business with Iran because of U.S.involvement, thus forcing the inevitable migration of Iran looking
for a new customer.
Without a
doubt, Iran possesses
extreme leverage over other countries because of the price and demand for oil
as explained by Shaul Bakhash, a historian from George Mason University. As seen
through our class discussions and analysis of Tullock’s explanation of tariffs
and monopolies, we can see how Iran's
decision making to circumvent the U.S. sanctions creates a much more
positive situation. Because of the leverage it possesses acting as oil holding
monopolist and possessing a “huge cushion of foreign-exchange reserves”, Iran’s revenue
will far exceed the forecasts with a $30 increase on the average oil price of a
barrel. Surplus revenue allows for the government to maintain popularity
through providing aid to other economic problems, and as we all know,
government parties love being popular. In the end, Iran just wants to find the
buyer who will “show them the money” without all the barriers. That’s the way
monopolies work. Question is, will China be able to spend the big
bucks? Odds are a billion people would say yes.
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