From the Telegraph:
“The Trump administration is hallucinating again. The US’s “economic D-Day” against Iran will exhaust political consent in Washington for this ill-conceived war long before it forces Iran’s Revolutionary Guards to capitulate.
It draws out the spectacle of Donald Trump’s aimless flailing in a region that neither he nor his close advisers begin to understand, further convulsing the global energy, food and commodity markets and further eviscerating US strategic credibility.
The plan to mount the “single greatest financial offensive ever marshalled against an adversary” requires also mobilising China, Russia, India, Turkey, a resentful Europe and the world’s major financial centres in a joint campaign to throttle Iran, a country that has already learned to live with 2,200 separate US sanctions.”
“The US treasury could plausibly have pulled off such a feat 10 to 15 years ago when it was able to crush nations by the “boa constrictor” method, using all the tools of the world’s dollarised financial system. But that supremacy relied on a tight-knit phalanx of democratic allies – or what we used to call the West. Such a world no longer exists, and China cannot be pushed around any longer.
Scott Bessent, the US treasury secretary, has threatened the economic obliteration of any country that declines to enlist as foot soldiers in America’s quarrel.
“If you insist on doing business with them – either transferring money, buying their oil, doing seaborne ship transport – the US government will put its full might and force toward enforcing against you,” he said.
Such hubris is courting fate for a nation that depends on constant inflows of capital from these same countries to fund its twin deficits and that already has to pay punitive interest rates to sell its bonds.”
“The US treasury made a Faustian pact by issuing so much short-term debt. The trap is closing. Bessent must roll over or fund almost $6tn (£4.4tn) every three months in a hostile market. The budget deficit was $432bn for the single month of July, up 48pc from the year before.”
“Trump has a solution for this and a warning for any bond investor that declines to feed his appetite. “We have many types of intervention. The ultimate intervention is our military. And if we have to use that, we will,” he said.
Does he intend to parachute the 101st Airborne into London’s Canary Wharf and Singapore’s harbour district to cart off pension fund managers in shackles for interrogation at Guantánamo?
It is normal to dial up pressure by starting with economic sanctions before escalating to killing people. Everybody can see that Trump is doing it the other way round because killing has comprehensively failed.
The world can see that the US is overstretched, lacks sufficient military power to enforce its will, has exhausted two thirds of its Patriot interceptors and “virtually all” its surface-to-surface (Atacms) missiles, and has denuded its defences in the Far East. It can see that the US lacks the stomach for a full ground invasion of Iran and anything short of that is whistling in the wind.”
“Iran can see all of this too. The regime has survived a bombing campaign and the assassination of 180 members of its leadership cast. Sanctions are almost laughable at this juncture.
Iran’s land border stretches for 5,900 kilometres across seven countries, most of them either friendly or cynically transactional. The frontier rises in an arc from Pakistan to the Eurasian heartland around the Caspian, then down the other side to Turkey and the entire eastern side of Iraq. It is impossible to sustain a goods blockade.
The International North-South Transport Corridor already runs as a rail freight link from Russia through Central Asia to Iran. The maritime route via the Caspian does a booming trade as well.
Russia cannot export much grain through the Black Sea right now because of Ukrainian drones so it is exporting what it can to Iran and through Iranian proxies to the wider Middle East. Ergo, a) Iran will have enough food for itself even if its economy is in dire straits and b) Iran will gain strategic leverage as a grain conduit to a region facing serious food stress.”
“China currently buys 90pc of Iran’s oil and in return China sells it machinery, vehicles and electronics, including sensors and engines for Iran’s Shahed drones as well as propellants for its ballistic missiles.
China will not let the US dictate how and with whom it may trade. It will go to some lengths to demonstrate this objection.
If the US imposes secondary sanctions on Chinese banks and entities, Beijing has a rich menu of retaliation, starting with curbs on critical minerals.
Bessent has demonstrated by his actions that he fears rising US bond yields. Beijing knows this, and if it wants to rattle his cage, it can play a few hedge fund tricks of its own by weaponising $4tn of dollar assets held by the Chinese central bank, the state-controlled commercial banks and the giant state-policy banks.
If the US does impose secondary sanctions on Chinese banks, it will have to do the same to European banks that do business with China, otherwise the financial blockade breaks down. But the EU now has its blocking statute aimed at forbidding its own companies from complying with US extra-territorial sanctions or submitting to US coercion.”
“Iran has a say in the matter too and may choose to hold Trump’s feet to the fire, exploiting the window between now and the mid-term elections to cause commodity havoc while always staying just below the threshold of total conflagration.
“If the economic war continues, not a single drop of oil will be exported, neither through the Strait of Hormuz nor from anywhere in the Persian Gulf,” said Mohsen Rezaee, the head of Iran’s Supreme National Security Council.”
“That too is bluster, but it is closer to the truth than Washington cares to admit. Iran still controls the Strait of Hormuz and has a second partial stranglehold over the Red Sea via its Houthi allies.
It still has a sufficient arsenal of drones and missiles hidden in mountains to strike commercial shipping at will and enough to inflict serious damage to the energy infrastructure of the Gulf states.
The rest of us are condemned to months of mounting stress in the global hydrocarbon markets as storage falls to critically low levels and even greater stress in the markets for diesel, petrol and jet fuel.”
“The refined petroleum products that we consume are trading today at levels equivalent to crude oil prices of $140 to $160 a barrel.
The IATA jet fuel index is $170 in Europe and $165 in the US.
Wholesale diesel costs $185 in New York harbour and $180 in Rotterdam, and it is diesel that fuels farming, trucking, construction and swaths of the industrial economy on both sides of the Atlantic.
Natural gas prices in Europe are trading this week at €69 per megawatt hour, higher than the panic peak at the onset of Trump’s Iran war.
European inventories are disturbingly low for this time of the year, and Britain has almost no safety buffer. Andy Burnham will face his first big crisis if this winter proves harsh.”
“These commodity costs are becoming embedded in the global supply chain, are already visible in rising bond yields and will soon to be visible in rising inflation and the cost of living.
It is hard to see any way out of this impasse since Trump has only two options: either to accept defeat on Iranian terms, which become more exigent by the week, or to mobilise the US for a long, bloody and costly war that consumes his presidency and may also end in defeat. He shrinks from both.
Trump is instead clutching at straws, searching for an elusive, painless out and drawing out the agony for the US and the world.
At least Jimmy Carter knew his limits.”