With Trump’s long anticipated announcement on the fate of the Joint Comprehensive Plan of Action, i.e., the Iran Nuclear Deal, now set at 2pm on Tuesday, the world is scrambling to handicap the odds that Trump i) lets the deal live, and ii) permits Iran to continue exporting as much as 1mmbpd.
I will be announcing my decision on the Iran Deal tomorrow from the White House at 2:00pm.
— Donald J. Trump (@realDonaldTrump) May 7, 2018
That said, barring some last minute miracle, if the late afternoon conjecture by the NYT is accurate, and following news over the weekend that Obama’s Secretary of State had secretly been engaging in shadow diplomacy to preserve the JCPOA, in less than 24 hours the US will no longer be a signatory to the Iran deal, just as Trump had promised during his presidential campaign.
According to NYT sources, “diplomats who were familiar with the negotiations said Mr. Trump appeared inclined to scrap the deal and reimpose sanctions on Iran that were suspended in an accord reached in Vienna in July 2015.”
As Bloomberg adds, quoting an unnamed European diplomat, there may be a chance President Trump’s will decide to keep the U.S. in the existing Iran nuclear deal, but it’s only a very small chance. The diplomat also said that “unless something changes, it’s pretty obvious Trump probably won’t waive sanctions” as the Trump administration seems to seek entirely new agreement, in contrast to European allies who’ve sought to build on existing deal.
Even Iran, despite warning the US will suffer from “historic regret” if it withdraws from the Nuclear Deal, has reportedly made back up plans for just that contingency.
And yet, following a full-court press by European heads of state, most notably Macron and Merkel, both of whom have been purchasing Iranian crude at below-market prices for the past 3 years and are eager to continue the Iran real, it is distinctly possible that in announcing the scrapping of the deal, Trump will provide for some continuity for the rest of the world so that i) Iran is not blacklisted by SWIFT again and ii) Iran oil exports can continue, to wit:
it is unclear whether he would moderate that move, perhaps by allowing the European nations to move ahead with their economic relations with Tehran without being penalized by the United States.
Mr. Trump issued two tweets about the coming decision. The first berated John Kerry, the former secretary of state, for his “possibly illegal Shadow Diplomacy on the very badly negotiated Iran deal.” It was an apparent reference to Mr. Kerry’s calls to leaders around the world looking for ways to save an accord that he dedicated much of his term during the Obama administration to negotiating.
Withdrawing the US from the deal will open the way for Tehran to resume making nuclear fuel: as a reminder, Iran’s agreement with world powers required the country to ship about 97 percent of its nuclear fuel out of the country, and to halt production of new fuel for 15 years.
This newfound liberty for Iran will also mean that the odds of a war with Israel soar, as Netanyahu will do everything in his power to prevent Tehran from developing nuclear weapons, as was the case in the several years before Obama sanctioned Iran in March 2012 with an executive order.
But the key question that has yet to be answered is whether Trump has been notified that the surging oil – and thus gasoline – price as the world “prices in” the elimination of up to 1 million barrels in Iranian oil, will offset any benefits to the middle class from Trump’s tax cuts as we explained last month in “Rising Gas Prices Threaten To Wipe Out Trump’s Tax Cut Benefits.” And, related to that, since there is nothing Americans hate more than high oil prices, how long until Democrats latch on to the issue of declining Iranian oil supply as the key driver of the highest gas prices in 4 years as a key political talking point for the upcoming midterm elections.
Since it is unlikely that Trump is willing to risk a political revulsion to a highly unpopular surge in commodity inflation just to teach Iran a lesson – especially one that may lead to his impeachment if the Democrats win the midterms – it is more likely than not that for all the bluster, Trump will offer some quasi-compromise that keeps Iranian oil exports in play, and may explain why oil has continued to sell off on the news…
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