The Real Reason Trump Killed The Iran Deal

U.S. President Donald Trump on May 8, 2018, fulfilled a major campaign promise to his voters by withdrawing the U.S. from the 2015 JCPOA (Joint Comprehensive Plan of Action) into which it had entered with Iran and the five permanent members of the United Nations Security Council plus Germany (the P5+1) in order to exclude the prospect of Iran developing an indigenous nuclear weapons capability until at least 2028.

But the Trump action is unlikely to bring about a meaningful improvement in the security situation of the U.S., Israel, or the Middle East generally, nor significantly damage Iran’s strategic capabilities.

President Trump’s move, however, clearly threw many aspects of U.S. global strategic policy into an area of uncertainty, even though it also promised a buffer period of around six months before President Trump would have to make some major decisions with regard to the U.S. withdrawal from the JCPOA.

The buffer period may, in fact, be his negotiating period with Iran, the DPRK, Europe, and others. Certainly, one aspect of the Trump action is that it changes some of the dynamics with regard to the President’s anticipated summit with North Korean (DPRK) leader Kim Jong-Un, which has been scheduled to take place within this “window of confusion” period which Trump created.

It was no coincidence that Kim Jong-Un met in Dalien, in the People’s Republic of China (PRC), on May 8 and 9, 2018, with PRC Pres. Xi Jinping — their second meeting in two months — knowing that the Trump decision on Iran was coming.

The U.S.-Iran disposition is a critical element in the options open to the DPRK in its negotiations on a proposed agreement to “de-nuclearize” the Korean Peninsula. Both Beijing and Pyongyang are aware that by putting the U.S.-Iran 2015 deal “in play”, Trump has introduced uncertainty for them in making plans which may require coordination with — and possible “deep-freeze” warehousing of strategic weapons in — Iran. The Trump decision to end U.S. participation in the JCPOA delivered the message to the DPRK and PRC that the U.S. President would deliver on his campaign promises, regardless of domestic or foreign pressure. It also sent a message to Tehran that Mr Trump had begun his “negotiating process” with Tehran, and that the coming six months’ buffer period would be a critical maneuvering time. Related: The Truth About Peace On The Korean Peninsula

So the unilateral decision by Mr Trump is part of a significant process, with ramifications in many areas. It has no clear-cut outcome; in other words, there are risks for many parties.

There is no doubt that Trump felt that the JCPOA was unworkable from the U.S.’ standpoint. He had telegraphed to Tehran that the accord needed to be upgraded, re-negotiated, or that a supplementary agreement needed to be reached. Tehran responded, indirectly, that it was not prepared to re-consider any aspect of the accord, and presumably felt that the European powers could persuade the U.S. President that a “work-around” policy could be developed.

Absent any signs of possible negotiation with Tehran, President Trump had only one card left to play, and that was withdrawal from the JCPOA. But it did not spell the end of all options, either for Iran, or for other players.

There is no indication that the decision would necessarily lead to an expansion of conflict in the Persian Gulf. Indeed, the Trump move gave some of the Arabian Peninsula states some time to re-group. Of significance is the reality that any potential constraints on Iran, through U.S. sanctions, could impact the country’s ability to sell oil on much of the world market, and this could drive up oil prices, something which would give Saudi Arabia some economic relief.

It could also positively aid the Russian economy, which is also heavily dependent on oil and gas exports, and therefore sensitive to oil pricing on the world market.

There is also, as the Iranian leadership responded on May 8, 2018, the reality that new U.S. sanctions would not seriously jeopardize the Iranian economy, although even minor downturns — along with the reduction in public expectations — could affect the mood of the public.

The real strategic ramification would be on European corporations being forced in the coming six months to decide whether they wished to continue doing business with the U.S., or whether they would choose to continue to pursue the commercial opportunities in Iran. This would primarily impact Airbus, as far as European Union (EU) companies are concerned, but it would equally hit Boeing in the U.S. Boeing would have to forego the sale of 110 airliners [15 B.777-9; 50 B.737 MAX 8; 15 B.777-300ER; and 30 B.737 MAX] to Iran Air — some of which were being produced for 2018 delivery — and Aseman Airlines. Iran Air had also contracted to buy 118 Airbus aircraft, including 12 Airbus A380 heavy widebody aircraft. But even by February 2018, Iran was looking for alternatives, including — in the single-aisle airliner category — the Russian 98-seat Sukhoi Superjet-100 light twin-jet. Some Airbus aircraft — 11 ATR twin-turboprop transports — had already been delivered to Iran by the end of 2017. Sales to Iran from Russia and the PRC would be unaffected by the U.S. sanctions.

What is significant is that the sanctions would almost certainly hasten the denomination of Iranian transactions with foreign suppliers in PRC yuan/renminbi and Russian rubles. And, with the prospect of Saudi Arabia also considering some denomination of oil sales in renminbi, the end of the total domination of the energy market in dollars — petrodollars — is looking increasingly likely after almost a half-century of total domination of the global economy by the U.S. dollar as the universal reserve currency. This is unlikely to negatively impact the U.S. in the short term, but it would strengthen the economies of the PRC and Russia, and gradually serve to see an erosion of the U.S. influence on global markets.

Related: Never Trust A Banker About Oil Prices

Meanwhile, although there is no immediate evidence that the Trump decision would necessarily lead to an uptick of conflict in the near-term in the Middle East, it is possible that it could allow Iran greater latitude in developing its strategic capabilities, including taking a more open stance on its nuclear weapons program.

Iranian President Hojjat ol-Eslam Hasan Fereidun Rouhani, however, said on May 8, 2018, in response to the Trump decision, that Iran would stay in the JCPOA with the other parties to the agreement. The question will be what meaning the JCPOA would have without the U.S. present and with the U.S. in a position to impose sanctions on Iran which would effectively penalize non-U.S. corporations if they attempted to do business with Iran, regardless of the fact that their domestic laws and their acceptance of the JCPOA permit such trade. The U.S., however, still has sufficient economic leverage to ensure that most major trading firms would not wish to jeopardize their ability to do business in the U.S. by continuing to trade with Iran.

The underlying reality of the entire process — both the JCPOA and the subsequent Trump repudiation of it — was that it did nothing in reality to constrain Iran from developing and deploying nuclear weapons.

Even without the Israeli-supplied intelligence which showed Iran’s historical commitment to development of nuclear weapons, it has been known since 1990 that Iran had acquired ex-Soviet nuclear weapons (from Kazakhstan stockpiles), then other nuclear weapons from Ukraine and the DPRK, and finally — working with the DPRK — developed and tested a nuclear weapon of its own design.

The JCPOA did not preclude ongoing development of Iranian ballistic missile delivery systems, and its national command authority (NCA) capabilities. These have consistently been developed and deployed. So the JCPOA did nothing to constrain that reality; it merely caused Iran to agree to curtail what had been a rapidly growing capability to create large quantities of fissile materials.

The Israeli Government of Prime Minister Binyamin Netanyahu and the Government of the Kingdom of Saudi Arabia welcomed the Trump decision to exit the JCPOA, but it is, in meaningful terms, uncertain what benefit the Trump action would have for those states. There is little doubt that the action ended a period of hypocrisy, given that it was largely a “deal for a deal’s sake”. But it did give Iran and its detractors the opportunity to end a period of mutual hostility which could have paved the way to a serious rapprochement.

It could have been an opportunity for the U.S. to seek influence again in Iran, something it has lacked since U.S. President Jimmy Carter deliberately undermined the Shah of Iran in 1978-79. The U.S. had the opportunity to offset some of Russia’s (and, to a degree, the PRC’s) influence in Iran by beginning a process to normalize U.S.-Iranian relations. It did not do this, and neither did the Iranian clerical Government take full advantage of the opening.

Arguably, a further catalyst was needed; one which the JCPOA failed to provide.

In the meantime, however, it is Russia, the PRC, and Turkey which will move quickly to fill the vacuum created by the new sanctions regime which the U.S. has introduced. And Saudi Arabia and the United Arab Emirates, in particular, will attempt to rebuild strategic credibility in the hope that Iran will be constrained by the sanctions to reduce its regional military and proxy warfare missions. But they risk seeing Iran, now absent the carrot of the opening to the U.S. and West, expand its projection, given that it now has less reason for constraint.

There is also little scope in the action for the U.S. to significantly improve its influence and position in the Middle East.

In the short-term, the only strategic advantage to any side is the removal of the hypocritical aspects of the JCPOA. It is possible that the move will force Turkey further toward cooperation with Iran, thereby hastening U.S. policy decisions as to how to deal with the fact that Turkey has become strategically hostile to the U.S. and NATO. Indeed, events are pushing together mutually suspicious players: Iran, Russia, and Turkey. But there is no opening in any of this for the U.S.

So the major motivations for President Trump’s move seem to include fulfilling a campaign promise to end the JCPOA, and introducing a new level of bargaining leverage in his upcoming talks with Kim Jung-Un.

President Rouhani said, in response to the Trump move, that the U.S. “has never adhered to its commitments”; and there is some justification for that comment, given the history that one U.S. administration will often contradict the commitments of predecessor administrations. But Trump has made it clear that he would stand by his own commitments. Iranian state television said that the U.S. President’s decision to withdraw from the JCPOA was “illegal, illegitimate, and undermines international agreements”. It may undermine international agreements, but there is no evidence that the withdrawal from the JCPOA was illegal. Still, it will make it more difficult for the U.S. to build future alliances or undertakings which rely heavily on mutual trust.

By Gregory R. Copley for Oilprice.com

More Top Reads From Oilprice.com:

• Is This The End Of Diesel Trucks?
• Who Was Buying Iranian Oil And What Happens Next?
• The Next Big Trend In Offshore Oil & Gas