BREAKINGVIEWS-US wrestles with hard realities of pressuring Iran

By Yawen Chen and Afiq Fitri Alias

LONDON, Jan 15 (Reuters Breakingviews) - Donald Trump may be realising Iran is not Venezuela. After days of implying he might be about to somehow intervene in the Islamic Republic – as he did earlier this month in the Latin American state – the U.S. president said on Wednesday he had been told protests that have left thousands of Iranians dead might be easing. While that doesn’t preordain what happens next, the hard reality is that most ways to economically pressure Tehran won’t work – and the one that would remains a step too far.

Trump’s main non-martial warning – yet to be formalised – has been to threaten a 25% tariff on U.S. imports from countries maintaining trade links with Iran. In 2024 China, the UAE, India and Turkey collectively bought over two-thirds of Tehran’s exports, at a cost of $72 billion. The theory is that they might then cut back this trade in response, hurting the rial and sending Iranian inflation even higher than its current level exceeding 40%. But that would spark another trade war with the United States’ allies and rivals alike. And the Islamic Republic might not be cowed by yet-higher prices, given it is already killing its citizens.

A smarter option might be to target the chunk of Iranian trade revenue that comes from selling oil and gas. In 2024, Iran shipped $38 billion of “mineral fuels and oils”, which accounted for 36% of total exports, TradeImeX data shows. But that’s not straightforward either. Since 2018, the U.S. has implemented tough sanctions on buyers of Iranian oil that effectively lock them out of the U.S. dollar-based financial system. Yet since the expiry of temporary waivers China has become the main customer, via a “burner system” of shell companies, shipping networks that rely on subterfuge to disguise cargo origins, and small “teapot” refineries which transact in the Chinese yuan.

If Trump really wanted to starve Iran of oil revenue he would probably have to directly target critical Iranian fossil fuel export terminals, and blockade or seize oil tankers carrying Iranian crude – as recently happened with ones carrying Venezuelan product. Even assuming he can identify the right ones, this could be seen by Iran – and potentially even China – as an unacceptable act of aggression. As well as targeting Iranian exports representing around 3% of the global oil trade it would risk disrupting the Strait of Hormuz, through which a fifth of global oil supply flows daily, and send oil prices spiralling.

Given Goldman Sachs forecasts Brent oil prices of only $56 a barrel this year on ample global crude supply, the U.S. president may yet view aggressive action as a risk worth taking to further destabilise the Islamic Republic. But just as any foreign military action beyond sporadic air strikes runs counter to his non-interventionist stance, really meaningful economic curbs would run counter to Trump’s stated policy of low energy prices, while also alarming regional allies like Saudi Arabia and the UAE. That’s probably why, for the moment, he’s hanging back.

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CONTEXT NEWS

U.S. President Donald Trump said on January 14 he had been told that killings in Iran’s crackdown on protests were easing and that he believed there was no current plan for large-scale executions, adopting a wait‑and‑see posture after earlier threatening intervention.

As of 0854 GMT on January 15, Brent crude was trading at $64.5 a barrel, down 3%.

Trump’s comments came after fears grew in the Middle East that Washington could launch strikes, following his repeated threats to intervene on behalf of Iranian protesters. Trump did not rule out possible U.S. military action, however.

Tensions escalated on January 14, as Iran said it had warned neighbours it would hit American bases in the region in the event of U.S. strikes, and a U.S. official said the United States was withdrawing some personnel from bases in the region. Several Western officials said U.S. military intervention could be imminent. Qatar said drawdowns from its Al Udeid air base, the biggest U.S. base in the Middle East, were “being undertaken in response to the current regional tensions”.

The clerical establishment has cracked down hard on one of the biggest challenges to its rule since the 1979 Islamic Revolution. More than 2,500 people have been reported killed in the unrest that spiralled out of protests over soaring prices.