In case you missed it, Trump Effectively Declared Economic War on Iran.

Trump is pressuring the world to stop trading with Iran. And starting November 4, Trump will sanction any country or company that does.

The feature image is from Iran Bans 1,300 Imports, Prepares To Resist Threatened US Sanctions.

The order suggests the US sanctions threat is pushing Tehran back towards running a "resistance economy" designed to conserve foreign exchange reserves

The EU announced a "Blocking Statute" that would allow companies to deal with Iran but companies that do so will be cutoff from US markets. And any EU bank that skirts the rules will find it is quickly locked up.

Thus, Trump unilaterally decides sanction policy for most of the world.

However, India, a top Iranian oil importer, announced it Will Not Heed U.S. Sanctions.

This leads to a potential two-part sanction avoidance mechanism.

Sanction Avoidance Part 1

  1. India and or China refuse to honor the sanctions.
  2. Iran accepts payment in Rupees and Yuan.
  3. India and China convert Rupees and Yuan to Bitcoin, Ethereum, EOS, etc.
  4. Iran is paid in cryptos.
  5. Iran converts cryptos to dollars or Euros.

That is only half the puzzle.

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Why?

Iran will have hard currency but will have no way to spend it.

Sanction Avoidance Part 2

  1. Iran buys US or Euro denominated goods but needs to get them into the country.
  2. Some country, Pakistan is the best choice, takes delivery of the goods and ships them across its land border to Iran for a fee (cheap oil).
  3. Alternatively, the goods are shipped to India, then Pakistan, then Iran. As another possibility, the goods are sent to China or India and travel by sea to Iran, again for a fee (cheap oil).

India has a trade surplus with the US, complicating matters. But what if India got a huge discount on the price of oil?

If India has oil importers that do little business with the US, then my avoidance idea is solid, at least through part 1.

Part two involves risk of confiscation on sea routes or destruction by drones on the land. Of course, that response from Trump would be an effective declaration of physical war on the countries involved.

Would Trump shut down India, a nuclear power? Pakistan a nuclear power? China, a nuclear power, even if China tells Trump to go to hell?

China Hardball

That last question is interesting. China can in theory demand tariff relief for honoring US sanctions on Iran.

There is obviously a huge risk of this getting out of hand if we start down one of these avoidance paths.

Mike "Mish" Shedlock

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