Five questions for Andrea Mennillo: With rising tensions between the United States and Iran, Trump’s unilateral actions put the global economic system at risk

In May 2018, United States President Donald Trump announced that the US was withdrawing from the nuclear deal with Iran negotiated by former President Barack Obama in 2015. This opened up a complicated international geopolitical scenario. Beneficiaries of Trump’s move could include Europe, Russia and even China, despite not being a natural ally of the United States.

We are in the heart of New York City, at Fordham University, where Dr Andrea Mennillo, esteemed economist and expert on international issues, has just received an important award for his academic work. We spoke to him and asked him about the latest turning point in US-Iran relations.

1. Dr. Mennillo, tell us what you think will happen now

Trump wants to strike hard: he said that sanctions will be applied at the highest level against Iran, but also against western companies and banks that continue to do business with Tehran. But we must take into account the practical aspects that, as always, are more complex than simple words. Business is about contracts, which must be respected. So while it is simple for the US administration to immediately ban new ones, it is more complicated to regulate those that already exist. For these, Trump has granted companies and financial companies up to 180 days to get out of their deals. However, this is a fairly long period of time, during which anything can happen. I imagine in particular diplomatic maneuvers of all kinds to try to soften the situation.

2. Will Trump’s decision bring Iran closer to China?

Of course, yes. Trump’s intent is obviously to hit the export of crude oil from Iran, although this will not be the only sector to be affected. An immediate consequence will be on oil supplies in Beijing, which will now undoubtedly be more accessible. But it is not only about oil. Commercial contracts of all kinds are banned, including for steel and food products. Of all the countries of the world, China will surely continue to keep exchange channels open with Iran. China, which boasts a constantly growing economy, needs Teheran’s crude oil. Only last year it accounted for 80 percent of the trade between the two countries. Moreover, if Europeans decide to accept Washington’s rules and stop the purchase of oil, the lack of buyers will represent a further advantage for the Chinese.

3. Is Italy also at risk?

If we consider that among European countries Italy currently does major business with Tehran, the answer is obvious. Just to give you an idea, there are currently orders in the energy and infrastructure sectors worth about 30 billion euros. The nuclear agreements signed by President Obama allowed Italy to resume its economic relations with Iran with greater vigor. We are talking about two billion euros in exports for the last year. And in return, oil is our main import from Iran.

It is not a coincidence that Eni has well-established relations in Iran; Trump’s current policies could pose a risk to it. Americans do not seem to make room for compromises: relations with Iran must be interrupted. Otherwise there could be consequences for those companies that also operate with the American banking system. Remember that Eni also has interests in Texas and Alaska … but Eni will not be the only one to suffer repercussions. In fact, there are a large number of companies linked to the infrastructure sector that have interests in Iran despite the signing of the agreements on nuclear power. These agreements are worth hundreds of millions of euros. The disappointment expressed by Italy and other European partners could, however, soften the White House’s position.

4. And where does Russia stand in this scenario?

Russia could have advantages on the Syrian side, finding itself in a position to obtain more concessions from Iran in terms of a peace agreement in Syria. It seems to me that Donald Trump has substantially strengthened Putin’s position in the Middle East. The same effect can be seen in the position of Europe, which, in deciding not to abandon the agreement signed by Obama with Iran, has in fact moved away from the US, getting closer to Russia and China, and then to Iran.

5. Do you think Trump risks isolating the US?

It certainly could be a possibility. We’ll need to see what the real goal of the American president is. Of course, Trump never liked the nuclear deal negotiated by his predecessor Obama. Trump himself has repeatedly said that the agreement is full of terrible imperfections and should be changed. However, one wonders whether it is worth shaking up the international geopolitical equilibrium to correct an agreement that, all in all, has inaugurated a new era in relations between the western world and with a country that is crucial for the future of the Middle East, like Iran.

Leave a Reply

Your email address will not be published. Required fields are marked *