PLAN B

The UN International Court began reviewing the claim of the Islamic Republic of Iran against the United States, where Tehran demands to suspend unilateral sanctions and refrain from threatening it with new restrictions. Iran believes that the United States violated its obligations under the bilateral treaty "On Friendship, Economic Relations and Consular Rights" of 1955.

In May 2018, Washington announced about its intention to resume sanctions against Iran. The first of the two announced stages became effective since early August and assumes the restriction of cooperation in the transport sector and trade in precious metals. In November, the US is preparing to impose sanctions on trades of Iranian oil. To this end, a group of high-ranking representatives of the US Department of State and the US Treasury visited about 20 countries in Europe, East Asia and the Middle East, warning them of the risks of continuing trade with Iran. However, it is unlikely that the United States succeeds in building a united front against Iran.

China, India and Turkey almost immediately refused to support the oil embargo of Washington against Iran. Nor can we expect support to the US from its European allies, which have expressed their dissatisfaction with unilateral withdrawal of the United States from the international nuclear deal with Tehran.

It seems very unrealistic to expect Russia to support Washington too, as the former is closely connected with Iran's close secular political and economic relations and geopolitical interests in the Middle East.

However, Washington has a Plan B, which provides for creating a collapse of prices in oil markets by increasing oil supply. According to The Wall Street Journal, the United States and other Western countries are intensively discussing the possibility of emergency supply of oil from strategic reserves to the market. Although the stock markets have not reacted to this report yet, the oil prices have been experiencing certain turbulence since the beginning of August.

Some analysts assume that under certain conditions, a well-developed scenario can lead to successful completion of Washington's attempts to bring down oil prices. They believe that back in the mid-1980s, the collusion between the United States and Saudi Arabia, which resulted in the collapse of global oil prices, showed the effectiveness of this technology, which put the USSR face to face with serious economic difficulties and ultimately led to its collapse.

Nevertheless, today's realities indicate that, most likely, the US will not repeat the same scenario. But even if the plan is implemented successfully, nobody knows if Tehhran capitulates in the confrontation with Washington.

Firstly, Iran, which has faced serious economic sanctions since the 1950s, probably has its own Plan B. One should not underestimate the autarkic economic regime that exists in Iran for many years and guarantees self-sufficiency of the country, minimizing its dependence on foreign trade.

Secondly, without the support of several of the largest OPEC members and external players, Washington cannot ruin the global oil prices. It can count only on its ally Saudi Arabia, which has been long known for its tough geopolitical struggle with Iran for the influence in the Middle East.

However, this situation has two sides, one of which is clearly not in favor of oil producing countries. Geopolitically, any sharp tactical decline in oil prices cannot be effective in the short term, while in the long run, the exporting countries will not be happy with cheap oil. For example, after Russia introduced its military troops in Syria, Saudi Arabia, at the request of the US, began actively increasing oil production followed by other big players because of fears of losing their niche in the market. As a result, the oversupply of the global market cut the oil prices by almost 3.5 times within 1.5-2 years. Yes, the Russian budget suffered significant losses, but eventually it turned out that Moscow was determined to reach its objectives no matter how difficult the situation was. Meanwhile, the Middle Eastern countries, which heavily depend on oil exports, lost a total of about $540 billion. Only in the first half of 2015, Saudi Arabia's oil revenues, always responding to Washington's requests, fell by $150 billion. In 2016, Riyadh finally agreed to offer OPEC members and other major producer countries outside the cartel to cut production, after which oil prices again began to rise, reaching today's level.

It is likely that the then decision of the Saudi Arabia to support OPEC partners was influenced by the bill considered by the US Congress, which would allow the US to bring the Saudi government to trial for its involvement in the 9/11 attacks. In response to this initiative, Riyadh threatened Washington to begin selling US Treasury bonds and other assets worth about $750 billion to avoid their freezing. This was followed by the White House's hasty statement that US President Barack Obama did not support the bill and would not sign it if approved by the Congress. The scandal was over, but, apparently, left the Saudis with unpleasant after-taste. In other words, Riyadh decided not to rely heavily on Washington's volatile policy and continue not to support the game to collapse oil prices to the detriment of its own interests.

Third, the storage of oil surplus required additional costs, which also placed a burden on the sluggish budget of the oil-producing countries.

Incidentally, American companies are in fact interested in high oil prices to a certain extent. In June 2014, for the first time in 40 years, they obtained the right to export outside of North America not only oil products, but also crude oil. At the same time, American producers of shale oil can make their business profitable when the prices start from $60 per barrel.

Fourth, understanding the strategic importance of oil, the oil-producing countries, and even the United States itself, are unlikely to be willing to use their resources for dumping prices to the detriment of future generations.

Fifth, cheap oil prices lead to a serious reduction in investments in the energy sector, which also leads to a weakening of related industries and the loss of jobs. By the way, according to the report of Arab Petroleum Investment, at the beginning of the last crisis, Saudi Arabia decided to reduce investment in 2015-2019 by $127 billion, whereas the previous estimate of investments implied an investment of $180 billion during 2014-2018.

Sixthly, unreasonably low oil prices in general do damage not only the oil-producing states, but also to the consuming countries, although they receive good dividends. For example, in the first half of 2015, China's spending on oil purchases declined by $120 billion, Japan's by $76 billion, India's by $44 billion, and South Korea's by $36 billion compared to 2017. The Eurozone countries saved $142 billion. The share of Germany, the driver of the European economy, has dropped $50 billion in savings. The US itself, which continues to import oil despite the so-called shale boom, have earned $110 billion.

Of course, such savings affect the price of manufactured goods in these countries. But, in general, this reduces demand in the consumer market including the products produced from oil in oil-producing countries. Thus, the latter reduces investment in the oil sector leading to sharp fall of the demand for equipment. Associated industries also face an investment hunger, as the money earned is mostly eaten up.

Low oil prices negatively affect the purchasing power of the population in the oil-exporting countries, which in turn reduces the demand for many goods imported from oil-producing countries. A similar situation arises in the sphere of tourism and other service sectors. This situation also negatively affects the investment policy of highly developed countries interested in large and "long" investments in the economy of developing countries, especially in the energy sector. In a word, the lost revenues from the oil market negatively affect the world economy. It is no accident that for two years of low oil prices, the world economy has shown such a weak growth.

Seventh, large banks are also interested in high oil prices. For example, the famous Rothschild dynasty through some American companies is actively involved in the implementation of oil and gas projects, including Sakhalin-2, even despite Washington's sanctions war against Russia.

In conclusion, it is possible that the seemingly contradictory statements of Donald Trump regarding Iran are actually thought to warm up the oil market, which will bring real good  dividends to the United States, which is going to be a major oil exporter. Of course, this version may look overly conspiratorial but the concepts of "oil" and "politics" in the world are already so intertwined and mutually complementary that any options are permissible.