Iran's oil production dipped to its lowest level in two and a half years in October ahead of the deadline for the second and conclusive phase of U.S. sanctions on Nov. 4.

The Trump administration’s go-it-alone approach to rein in Iran contrasts with Obama’s multinational tack. While both administrations worked to end Tehran’s development of nuclear weapons and discourage it from trying to become the dominant force in the Middle East, Trump’s move to impose economic sanctions on Iran’s trading partners is generating the desired effect of reducing Iranian crude exports and crippling its economy.  

It is still unclear how European companies will react to new European Union (EU) policies aimed at salvaging the Iran nuclear deal from which the Trump administration has withdrawn. The overarching question is whether the companies will risk U.S. sanctions by embracing the EU policies, which are clearly designed to defy Washington’s demand that its trading partners stop doing business with Iran.

The EU has taken a two-pronged approach to deal with the threat of sanctions. The first is enacting a statue that allows EU companies harmed by U.S. sanctions to sue for the business they have lost. The second is creating a special financial instrument to facilitate dealings between EU companies and Iran aimed at bypassing the world’s global trading currency, the dollar.

The EU’s moves have buoyed Iran's hopes of easing the effects of sanctions on its already languishing economy. Most European companies, however, are likely to refuse to trade with Tehran as the Trump administration has threatened to block them from doing business in the U.S. if they do so.  

It’s also doubtful that the special EU financial instrument will make much of a difference. The dollar has long dominated global commodity trading, and almost all of the world’s major insurance and shipping companies are acquiescing to U.S. demands.

Exports of Iranian crude in September were 700,000 to 1 million barrels a day less than in May—or between 1.7 million and 2 million barrels, depending on the estimate. May was actually a milestone for Iran: Its exports that month were the highest they had been since the Obama administration imposed sanctions.

Although the Trump administration has said it will issue waivers to eight importers of Iranian oil, including South Korea and India, further declines in Iranian exports may be forthcoming. China, Iran’s biggest oil market, is still in discussions with the administration to obtain similar waivers. To avoid any complications, the Chinese government has decided to temporarily halt the import of Iranian oil by ordering Sinopec, the China National Petroleum Company, and other oil companies not to buy from Iran as of November 2018. India, the second-largest buyer of Iranian crude, is also halting bookings as of November, according to the Iranian National Oil Company.

Meanwhile, Tehran’s efforts to line up support to help fight the sanctions have failed. Russia, having backed the nuclear deal, has railed against the sanctions but has done nothing to counter them. Russian Energy Minister Alexander Novak has denied reports of an Iranian oil re-export agreement between Moscow and Tehran, although he confirmed that negotiations are under way about bartering 100,000 barrels a day of Iranian crude for Russian goods.  

A major obstacle in Iran’s quest to obtain Russian help is that the two countries are crude-export competitors. In fact, experts say Russia will try to cash in on the U.S. sanctions by grabbing market share that Iran loses.

Turkey, which imports almost 7 percent of Iran’s oil, is trying to obtain waivers from Washington to evade the sanctions. The request has created a dilemma for the Trump administration, which is aware that a lot of Iranian oil was smuggled through Turkey to evade the Obama-era sanctions.

Another geopolitical cross-current is that Saudi Arabia has pledged to continue increasing its crude output to offset the global supply shortfall caused by drops in Iranian and other countries’ production.

In an interview with Bloomberg, Saudi Crown Prince Mohammad bin Salman reiterated OPEC and Russia’s resolve to make up losses stemming from the sanctions. He said that Saudi Arabia is producing an additional 1.5 million barrels of oil a day—more than double the amount lost to Iranian sanctions.

Although President Donald Trump has voiced criticism of the OPEC-Russia agreement to limit crude production in order to keep prices high, his administration seems comfortable with a Saudi Arabia-Russia partnership to compensate for Iranian export losses.  

Another twist in the supply scenario is that U.S. exports to Iranian crude buyers have helped make up the global deficit as well. The United States supplied a record amount of oil to China in June, helping to allay Chinese refineries’ supply concerns.

In an effort to ease the sanctions’ impact, the National Iranian Oil Company is now offering oil future contracts on the Iran Energy Exchange, or IRENEX. On the first day of trading, the company sold almost a fifth of the 1 million barrels in futures that were on offer. Although a morale booster, the sales are expected to have little overall impact. Four-fifths of the futures failed to sell, largely because 80 percent of the purchase price had to be in hard currency, which put buyers at risk of U.S. sanctions.  

Despite almost unanimous opposition from U.S. allies and Russia to Washington’s scrapping of the Iranian nuclear agreement, the U.S. has been able to cripple Iranian oil exports in recent months as Tehran’s efforts to enlist others to help have had no impact.

The Obama administration achieved a sanctions goal of slashing Iranian exports to 1 million barrels a day—a drop that battered the Iranian economy. The Trump administration’s goal is to reduce Iran’s exports to zero. Whether it can achieve this will hinge largely on whether European and Chinese buyers observe the sanctions.  

Ultimately, the sanctions are a means to a foreign policy end, but the United States has not expanded upon what that is. Does it want to force Tehran into a new treaty? Is it hoping that the sanctions will spark regime change? At the moment, the world does not know.  

Whatever the ultimate goal, a protracted stand-off with Iran will only hurt the Trump administration—and prolonging it will likely be a key goal of Tehran. The faster that Trump can achieve a successful conclusion to his Iran policy, the better off his administration is likely to be.

Iranian Presidency / Handout/Anadolu Agency/Getty Images