The U.S. has been at war with Iran since 2018 when President Trump withdrew from Obama’s Joint Comprehensive Plan of Action (JCPOA) with Iran. This has not been a shooting war, although it may come to that. It has been a financial war.

The U.S. is imposing a plan of “maximum pressure” on Iran. This includes excluding Iran from dollar payments systems and from the international hard currency payments system called SWIFT. It also involves banning banks that do business with Iran from U.S. dollar settlements and business in the U.S. The maximum-pressure plan goes further and bans Iranian oil exports (with some exceptions), freezing of Iranian accounts, seizure of Iranian assets and other measures.

These tactics are highly effective. A major European bank such as UBS or Credit Suisse will not jeopardize its lucrative U.S. business opportunities by doing business with Iran. The result has been a slow strangulation of the Iranian economy including lost revenues, lost imports and potential social discord as citizens discover they cannot buy computers, cellphones and other conveniences that others take for granted.

Now Iran has begun to fight back. As described in this article, Iran is shipping oil to China in its own tankers. But the captains are ordered to turn off their transponders that continually report the ship’s position via radio using GPS.

This makes it more difficult for U.S. intelligence agencies and ship traffic services to track the vessels. The U.S. has sophisticated satellite technology, but it has limited capacity and many demands on availability so it is not easily deployed to track the vessels.

It is easier to identify vessels without transponders as they arrive at a small number of ports in China that can handle the offloaded oil, but by then the damage is done.

There are almost no shots being fired in this war, but the financial, technological and economic fighting are real.

As the U.S. tightens the noose on Iran, investors can expect oil prices to go up despite recent weakness due to oversupply. The U.S.-Iran financial war has far to run.

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