Sputnik - President Donald Trump's intention to impose sanctions on Iranian crude exports could entail a significant drop in global oil supply. This is what analysts told CNBC earlier this week amid concerns that oil prices could reach a three digit number.




Sputnik discussed the correlation between�Iran sanctions and oil prices with�Gawdat Bahgat, professor of�national security affairs at�the National Defense University's Near East South Asia Center for�Strategic Study.

Sputnik: To what extent have Iranian sanctions been figured into�future prices already?

Gawdat Bahgat:�The oil market is driven more by�psychology and I believe it is clear that the Trump administration is determined to�impose a full embargo on�Iranian oil, but�also it is clear that Iran is determined to�find ways to�export its oil.

Just a few months ago, President Rouhani said that if his country will be prevented from�exporting oil, all other countries in�the Persian Gulf will not be allowed to�export oil. Because of�this, the market is reacting and I believe the reality will be clear in�a few weeks, who will prevail and whether Iran will be completely isolated, which I doubt.

Sputnik: I believe you're referring to�the threat of�Iran to�block the Strait of�Hormuz, which most people think is fairly unlikely as�a scenario simply because it would lead to�military action against�Iran by�various countries. Then we also have the position of�the European countries; we have Turkey, we have China and others, who have said they're going to�continue buying oil from�Iran and there's even talk of�creating a system to�circumvent the US sanctions. Do you think it will kick in�time?

Gawdat Bahgat:�I would not rule out�that Iran will at�least maintain the�threat to�close the Strait of�Hormuz; at�the end of�the day, Iran depends heavily on�oil and if it feels that it is going to�starve, they will do anything they can. In my mind, I do not think Iran will close the strait but�will use it as�leverage to�bring more pressure on�the United States to�allow Iran to�export oil, because Europe, China, India, many other countries, depend on�oil from�the Strait of�Hormuz.

If Iran keeps threatening and other countries see that there is credibility in�the Iranian threats, they will put some pressure on�the United States to�allow Iran to�export some of�its oil. This is very speculative and probably in�the next few weeks, we will know more. As you pointed out, there are some countries, not only China, India, Turkey, Russia, and some other countries, but�also the European Union is not going along�with the Trump administration to�completely isolate Iran.

Sputnik: How effective do you think their aim will be? They have said that they've decided to�go forward with�the creation of�a payment system, what are your hopes for�that? Do you think that it would be effective?

Gawdat Bahgat:�I believe the Iranians, so far, have taken the right approach. They have not overreacted, they�have not withdrawn from�the nuclear deal.�More or less they're playing the victim role from�the Iranian perspective and this is what the world is seeing: the United States withdrew from�the nuclear deal, Iran has honored its commitment. But also, at�the same time, Europe has much closer relations with�the United States; the American and European economies are very inter-dependent on�the each other, so I do not believe at�the end of�the day Europe will take Iran's side and leave the United States.

Sputnik: What can you say about�the tensions between�Iran and the US and their allies? There's sort of�a fight to�put pressure and at�the same time keep the oil prices down?

Gawdat Bahgat:�Iran is trying to�show the United States that it can fight back and that the closure of�the United States consulate in�Iraq is a sign that Iran is reacting and there is a low-intensity conflict going on�between Iran and the United States and I believe it is important not to�take it for�granted. Iran has options, there's no doubt the United States is much stronger, but�Iran has denied that it is behind�the attack on�the US diplomatic mission in�Iraq, but�it is clear that even if Iran is much weaker than�the United States, Iran has options.