MACRO-ECONOMICSINDIVIDUAL ASSIGNMENT Ankur Parwal – CMM025In April, President Trump, refuses to certify Iran’scompliance of terms of the Nuclear Agreement reached with Iran jointly byRussia, EU and America during Obama Presidency. America re-imposes sanctions onIran. Oil prices rise to more than $ 80 a barrel.
Iran nucleardeal was a 159-page agreement with five annexes, it started in 2015. An eightmember committee was setup to supervise this includes Iran, The United Statesof America, Britain, France, Germany, Russia, China and the European Union. Under the deal, Tehran would reduce the number ofcentrifuges to 5,000 at the Natanz uranium plant–half of the current number.Nationwide, the number of centrifuges would reduce from 19,000 to 6,000.The enrichment levels would be brought down to 3.7 percent, which was muchlower than the 90 percent needed to make a bomb. The stockpile for thelow-enrichment uranium would be capped to 300 kilograms for the next 15 years,down from the present 10,000 kilograms. Thishelps in lowering the capability of Iran to make a nuclear bomb and ensuringthat nuclear power usage is for civilian use only.
Reimposing of sanctions would restrictIran’s exports of oil. Iran comes in one of the top 10 countries of oil exports(exporting worth of $29.1 billion).
Country exported about 777 million barrelsof crude oil last year, averaging 2.62 million barrels a day. 62% of shipmentswere sent in Asia and 38% of exports was in Europe. Biggest importers of Iran’soil are China, world’s top oil buyer and energy consumer. Therefore if Iran isrestricted to export oil then a huge supply of oil will be cut out resulting inhigher demand and lesser supply. This would impact global trade as prices willrose above 80$ per barrel from 70.15$ (present price).
Countries which would bemajorly effected are India & China as they are developing. Oil is anessential component as every process requires oil and both the countries are ahuge buyer of oil. When price will increase to 80$ per barrel then countrieswill import lower than current position.India imports 13% of Iran’s oil exportswhich is about 11% of India’s oil import. Rise of price would increaseinflation rate which will slow down the market which will lead to unemployment,fall in stock market. Whereas UAE will benefit from re-imposing of sanctionsbecause supply is been cut off and demand is high for oil, hence price would beraised.
Profits will increase a lot
