Russia and oil exporters are winning the Iran war
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Russia and other oil exporters outside the Mideast — and not ensnared in the conflict — are emerging as the economic winners in the Iran war.
Why it matters: The market mechanisms are perhaps obvious here — higher oil prices are good for nations that sell oil — but are worth underlining, as the energy market shift plays into the geopolitical calculations.
How it works: Oil price changes are "a powerful mechanism of income redistribution across countries," Qian Wang, chief economist for Asia-Pacific and head of capital market research at Vanguard, wrote in a note Tuesday.
- The winners are those with large oil reserves that can export product and are located far from the war, such as Norway, Canada and some emerging market countries like Nigeria and Colombia.
- "They will experience inflation, but exports and GDP growth will stay robust," Wang wrote.
The big picture: While there are positives for countries like Canada or Norway, Russia is emerging as the clearest economic winner.
- The price of Russian crude oil is now trading above the global benchmark.
Driving the news: "Sanctioned Russian oil is trading at a premium to the most widely traded international benchmark, which is just mad," Nicholas Mulder, an economic historian at Cornell University, tells Axios.
- "If you're a Russian oil trader or a Russian company, you have never earned as much money selling oil as right now because of this supply-chain interruption," says Mulder, who studies sanctions and the author of "The Economic Weapon: The Rise of Sanctions as a Tool of Modern War."
State of play: Russia is one of the world's top oil exporters. Last week, the Trump administration issued a 30-day waiver on sanctions against the country, allowing it to sell oil to India.
- Reuters reported earlier this week that the White House is considering waiving more sanctions.
The other side: The White House said allowing India to accept the oil, already on a ship, was a short-term measure that would not provide significant financial benefit to Russia.
- "President Trump fully expected the rogue Iranian regime to try and disrupt the global markets," White House press secretary Karoline Leavitt said yesterday. She listed measures the administration is taking to lower prices including offering risk insurance and escorts to tankers.
- Price increases are "temporary," she said. "Americans will see oil and gas prices drop rapidly, potentially even lower than they were prior to the start of the operation, and we will live in a world where Iran can no longer threaten the United States or our allies with a nuclear bomb."
Reality check: This is a volatile situation that is constantly evolving.
- The winners today could be future losers.
