Trump’s Risky Iran Strategy

Stopping Iranian aggression knits China and Saudi Arabia together
May 6, 2019 Updated: May 8, 2019

As the Trump administration seeks to achieve its goals on Mideast peace, nuclear security and other objectives involving Iran and beyond, some policy objectives may actually be working at cross purposes with one another. The sanctions against Iran are only a small part of a very complex ballet of power and diplomacy between the United States, Israel, Saudi Arabia, and China.

Trump’s Iran Policy: Risky But Necessary

Iran’s intention is to become the dominant player in the Middle East. To the mullahs in Tehran, that means acquiring nuclear weapons. It also means eliminating Iran’s two main adversaries in the region—Israel and Saudi Arabia—both of which are allies of the U.S. Of course, neither of these outcomes are even thinkable, much less acceptable, to the United States or the targeted nations.

Therefore, the Trump policy is to contain Iran is a very necessary one to stop a wider Middle East war from erupting. This involves reducing Iran’s influence through its proxy fighters Hezbollah and Hamas as well as thwarting Iran’s nuclear ambitions. It also involves heavy sanctions. It’s no secret that civil unrest in Iran is rising. The people are fed up living in a pariah state with no future for the younger generation. Economic sanctions, painful for the masses, only add to that unrest.

You may recall that the Obama administration dropped the sanctions against Iran as a bargaining chip in the Iranian nuclear deal. Supposedly, this was Barack Obama’s top foreign policy achievement. But in light of Iran’s repeated violations of the conditions of the agreement, the Trump administration withdrew from it and re-applied the trade sanctions in November of 2018.

However, certain waivers to the sanctions were granted to specific countries that relied on Iranian oil. Those waivers expired this week. Trump’s decision not to renew them will make it more difficult for Iran to sell its oil and for its customers to buy it from them. Violators could face punitive consequences against their dollar-based assets and banking transactions. China is one of those countries, as well as the European Union.

China, Saudi Arabia, and the Petro Dollar

That’s where things get complicated. Iran’s biggest oil customer is China. And, with U.S. tariffs against China already in place, U.S. oil exports to China have all but dried up. What’s more, with China’s oil imports from Iran falling 25 percent from March of 2018 to March of 2019, China must find oil from other suppliers.

Enter Saudi Arabia. The top importer of Saudi Arabian oil is also China. At the same time, the United States has become the world’s top producer of oil equivalents, outpacing even Saudi Arabia’s production. In fact, the recent explosion in U.S. oil and gas production has led to a substantial challenge to OPEC, the energy cartel that has dominated the world fossil energy market since the 1970s. As a result, Saudi Arabia’s economy is on a much weaker footing than it was even a few years ago.

But it’s not only a decline in U.S. imports of Saudi oil that’s posing a direct threat to Saudi Arabia’s economy. The growing support in the U.S. Congress for NOPEC (No Oil Producing and Exporting Cartels Act) legislation that would apply U.S. anti-cartel laws to the OPEC cartel has led Saudi policy makers and their OPEC partners to consider abandoning the petrodollar.

That’s a very big deal. For the first time since the mid-1970s, OPEC is considering accepting other currencies in place of the U.S. dollar for their oil sales. If that happened – though not yet likely – the U.S. dollar could lose its status as the world’s reserve currency. That could potentially lead to the devaluation of dollar-denominated assets around the world and a crisis in the American economy. That may well explain Trump sticking by Saudi Arabia in the wake of the brutal and notorious killing of journalist Jamal Khashoggi.

Trump’s ‘Deal of the Century’ Mideast Peace Plan

With all the focus on the Russia collusion hearings, Trump’s peace plan for Israel and the Palestinians has been developing for the past two years. Reports are that the so-called, “deal of the century” involves some very creative ideas and is expected to be announced in June after the Islamic observance of Ramadan.

Saudi Arabia has reportedly offered Palestinian leader Mahmoud Abbas $10 billion to accept Trump’s plan, which may call for the Arabs living in the Palestinian territory to return to their original home countries.

But there will also be a security and military component for Israel that will potentially involve cooperation with Saudi Arabia. This triangulation seems sensible and beneficial for all sides. Saudi Arabia wants Israeli intelligence, military, and technological support in addition to that of the United States to counter Iran’s efforts against them. As for Israel, it would welcome the Saudis as an ally in the region.

Saudi Arabia Pivots to China

This set up leaves China in a very strategic position. Last year saw a 32 percent rise in trade between China and Saudi Arabia in areas such as commerce, security, and defense. And earlier this year, President Xi and Saudi Crown Prince Mohammed bin Salmon signed 12 new agreements for cooperation. In other words, both countries see that a big part of both their futures involves deepening their relationship on both a commercial and a strategic level.

Therefore, as the United States continues its trade war with China, as well as its Iranian containment policy, its key ally in the Arab world for both of those objectives, as well as a major factor in Trump’s Mideast peace plan, is turning eastward to China. China, therefore, will seek to leverage its growing relationship with Saudi Arabia to its own advantage against the United States to serve their greater objective of supplanting America as the global hegemonic power.

There are several opportunities and areas in which to do so. For example, would China encourage and support the Saudis in abandoning the petrodollar? At some point, most certainly. Would Saudi Arabia be vulnerable to China buying oil from another provider? Absolutely.

But does China have an interest in seeing Trump’s peace plan fail? If it meant further chaos, a defeat for American prestige and influence in the region, as well as the potential for access to Israel’s newly discovered oil and natural gas reserves, the answer is “yes”.

History shows the rise of competing powers leads to the rise of multi-polarity and its inherent instability. Our times are no exception and one can imagine some very negative outcomes. As President Trump is finding out, containing Iran is just the beginning of a long chain or possible scenarios.

James Gorrie is a writer based in Texas. He is the author of “The China Crisis.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.