Lawmakers from both parties want President Joe Biden to take a hardline stance against Iran for its support of Hamas before the deadly weekend offensive in Israel. As White House officials consider what role Tehran might have played in the terrorist event, the economic consequences of their next steps could ripple across several geopolitical hotspots. The voices calling for an assault on Iran’s oil production and export capabilities range from Sen. Lindsey Graham (R-S.C.) to Rep. Jared Moskowitz (D-Fla.), our Manuel Quinones and Bob King report. But any crackdown on a recent surge in Iranian production — and China’s possible emergence as the largest buyer — could cause energy prices to spike at a precarious time in world central banks’ attempts to quell inflation. “The Biden administration has been extremely thoughtful in the consequences of some of these sanctions actions,” Daniel Tannebaum, a former sanctions compliance official with the Federal Reserve Bank of New York who’s now a partner at Oliver Wyman, told MM. “The last thing they’re going to want to do is take an action that drives up energy prices around the world.” Enter Venezuela: The Biden administration may lift “some oil and banking sanctions on Venezuela once Caracas announces measures to hold its presidential elections in a more democratic fashion,” Bloomberg reports. The U.S. has been at odds with Venezuela — which boasts the world’s largest volume of oil reserves — since the early 2000s. But some observers have interpreted a recent decision to resume repatriation flights of undocumented Venezuelan immigrants as a sign that relations between the U.S. and President Nicolás Maduro’s administration had thawed. That could be a factor if the administration announces any new restriction on Iran’s oil industry. The Treasury considers the effects on markets when it comes to sanctions and enforcement. The Biden administration previously weighed easing sanctions on Venezuela, at least in part, to stabilize oil prices in the months after imposing tight restrictions on Russian institutions following its invasion of Ukraine. “We are constantly refining our policy and our sanctions will be reflective of the current situation. As we learn more about Iran’s role in this barbaric attack, we can and will make adjustments,” a National Security Council spokesperson said in a statement. Still: “In terms of mitigating market disruption, the short-term gains of lifting sanctions on Venezuela would be pretty limited,” said Matt Swinehart of Rock Creek Advisors, a former Treasury official who worked on sanction programs during the Biden and Trump administrations. While Venezuelan oil production has improved after almost a decade of declines, the country’s limited infrastructure and fiscal capacity could prove a challenge to increasing supply. “It’s likely less attractive than encouraging OPEC and others to increase production, which also has downsides but could deliver supply in the near-term,” Swinehart said. That would be a big test of the administration’s relationship with Saudi Arabia. Saudi Arabia — as well as Russia — slashed production earlier this year to account for weaker demand from China. And the “Saudis or other producers may want to see evidence that the U.S. and Europe are taking actions that will meaningfully reduce Iranian supply before proceeding with plans to ramp up,” Swinehart said. IT’S THURSDAY — Send tips, gossip and suggestions to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com.
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