Both India and Turkey have said they will defy President Trump’s call for them to stop buying Iranian oil once the U.S. reapplies sanctions in November. That isn’t really news.
Both of them defied the Obama administration in 2012, albeit in different way. Turkey changed its banking rules to monetize gold and used its gold reserves as a means to launder Iranian oil payments for third parties through its banking system.
India bypassed cutting off Iran from the U.S. dollar by beginning a goods-for-oil swap program.
Today, however, the geopolitical background is far different. Today, Iran can and does list its oil for sale in Shanghai’s futures market payable in Chinese Yuan. Turkey can recycle its Yuan it receives from its large trade deficit with China to up its purchases of Iranian oil if need be.
But, more importantly, both India and Turkey have geopolitical freedoms they didn’t have in 2012. I have covered the Turkey angle on this at length. India, on the other hand, I haven’t.
Iran has become Turkey’s biggest oil importer.
Turkey, a NATO ally, is dependent on imports for almost all of its energy needs. In the first four months of this year, Turkey bought 3.077 million tons of crude oil from Iran, almost 55 percent of its total crude supplies, according to data from Turkey’s Energy Market Regulatory Agency (EPDK).
President Recep Tayyip Erdo an last year said Turkey was looking to raise the volume of its annual trade with Iran to $30 billion from $10 billion.
And it doesn’t look like this will change with Trump’s sanctions.
With President Erdogan winning re-election he now goes into the NATO Summit with Trump on July 11-12th with a lot of leverage. Erdogan has openly courted Russia on energy supplies.
It just began construction on its first nuclear power plant being built by Russia which is due to begin generating power by 2023. But, in the near term, Turkey is in bed with Gazprom on the Turkish Stream pipeline, which is ready to begin the land-based portion.
The permits have not been issued however. Turkey has been dragging its feet on this. And with good reason, Erdogan knows Turkish Stream is a bargaining chip for him with Trump at the NATO summit.
Turkey’s NATO status is becoming problematic and it’s why I don’t really expect Trump to take the U.S. out of the treaty organization just yet. He wants to lessen our involvement and may very well announce a major funding cut at the Summit, but if his regime change strategy for Iran (and Germany) is to succeed he can’t completely alienate Erdogan just yet.
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