Energy dominance and financial hegemony make US misuse sanctions

By Niu Xinchun Source:Global Times Published: 2019/5/12 18:58:39

Illustration: Liu Rui/GT

Recently, the US has been exerting increasing political and military pressure on Iran. The most substantial part is that Washington announced that no country would be exempt from US sanctions any longer if they continued to import oil from Iran, intending to reduce Iranian oil exports to zero.

This is the first time that the US has imposed comprehensive sanctions on a major oil-producing country. This major event marks a revolutionary change in the international energy market and symbolizes a significant shift in US energy diplomacy. It also indicates that energy will become a "new weapon" of US hegemony.

The 1973 oil crisis had a profound psychological impact on the US. Energy was promoted to the level of national security strategy. Since then, energy independence has become the pursuit of generations of Americans. In 1975, US Congress passed the Energy Policy and Conservation Act, banning US oil exports to ensure its own supply. Since then, it has become the core of US diplomacy to guarantee oil supply and stabilize oil prices. Since the 1980s, the US has been increasingly involved in Middle Eastern conflicts, such as intervening in the Iran-Iraq war, starting the Gulf War, and stirring up the Iraq war. It cannot be said that oil is the theme of every war, it is a common thread.

In the past decades, the US has undoubtedly been the biggest beneficiary of the revolutionary changes in the international energy market. While energy efficiency has greatly improved, oil production is also rising rapidly, and oil has been used less and produced more.

At present, the US is the world's largest producer and consumer of liquid oil and is perhaps the country with the most sufficient spare capacity. US Energy independence will come soon. It is expected that by 2024, US oil exports will surpass Russia and come close to Saudi Arabia.

This has led to major changes in the role the US plays in the international energy market. In the past, oil was a stick Middle Eastern countries used against the US. Now the situation is reversed. The US is influencing energy prices through trade, sanctions, control of channels of energy, strategic oil reserves, and the formulation of new energy standards, disciplining countries Washington dislikes. 

Oil weapons are not new to US diplomacy, but the power of oil sanctions has never been so great. The US now has both global energy dominance and global financial hegemony. It is the combination of the two that has given US oil weapons unprecedented power, which has also made the US addicted to sanctions. 

Having a dominant position in the global energy market, the US has become unscrupulous when using oil as a weapon. For a long time, the US, as the world's largest oil consumer, had been quite concerned about the stability of oil prices. When using oil as a weapon, the impact on oil prices must be carefully considered. Only by possessing the ability to increase and reduce production at any time can it be possible to use oil weapons with ease. Once a crisis occurs now, the US government is fully capable of that for the moment. 

Financial hegemony has enabled the US to sanction companies that have energy trade with Iran. That is, companies that import Iranian oil and provide insurance, finance, and transportation for Iranian oil cannot use the US-controlled financial system and thus face the risk of being expelled from the US market.

The US used oil to suppress Iran, Russia, and Venezuela. So far, the international community has not shown signs of countering US oil threats. Although Europe has taken some symbolic measures to resist US sanctions, its power and determination are far from enough to contain US actions.

The Middle East is the most direct victim. The US has aimed oil weapons at Iran and adopted extreme pressure to completely isolate Iran, which will only make the Middle East more volatile.

International energy and the financial market are supposed to be international public goods. The US, as the most powerful country in the world, should provide the largest number of those. However, the US has used them as a weapon against other countries for selfish gain. In the long run, it will inevitably lose public trust.

The author is director at the Institute of Middle Eastern Studies, China Institutes of Contemporary International Relations.

Posted in: VIEWPOINT

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