What's Driving Rumors Of A New Iran Nuclear Deal?

Oil markets very briefly (and dramatically) reacted to rumors this week that an Iranian nuclear deal is back on the table. For some reason, even a whisper of this sends oil prices spiraling down on the notion that millions of barrels of Iranian oil will very suddenly be flooding the market. A report suggested that Washington would ease Iranian sanctions in return for an Iranian reduction in uranium enrichment. Of course, the report was then denied as false and misleading by both Washington and Tehran, but it did seem to suggest that not only OPEC can play the game of smoke and mirrors with oil prices.

While the official word is that there is no deal in the works, the rumors (or exaggerations) came out of Oman, where Tehran has confirmed that it had indirect talks with Washington in May. Mixed messages abound here, which is par for the course in an unofficial negotiation. Following the later-denied reports, Iran’s Supreme Leader Ayatollah Ali Khamenei issued a statement suggesting that he would support a nuclear agreement with the West but also suggested that nothing would be tweaked in the current nuclear regime to make that happen.

This should all be viewed from the regional-relations perspective and the recent development that has seen Iran become emboldened by the restoration of diplomatic relations with the Saudis. This has, in turn, put Israel on edge (more so than its usual panic). Israel on edge is dangerous, though geopolitical talking heads appear divided as to whether Israel would have enough hubris to attack Iran on its own (beyond the covert operations), without the direct support of the United States, which would rather attempt to resolve nuclear issues with Tehran via diplomacy, not outright war. Does Iran want to push Israel into a war that has more fronts that we can keep track of? Does Netanyahu really want to strike Iran on his own, or is this intensification meant to distract from domestic political difficulties? The latter is more likely.

Iran is trying to push Washington into a corner and force it into some sort of deal that would ease sanctions, which is exactly why Tehran is persistently making sure that the message gets out that it’s slowly but surely enriching uranium. This is a careful balancing act meant to generate more leverage on Iran’s part, without tipping the balance into dangerous territory. The game is to keep this simmering but not let it get to the boiling point. Leverage lies in between those two temperatures, and the point is to make sure it is clear that Iran can and is enriching uranium, getting close to weapons grade.

So far, that uranium enrichment appears to be working in Iran’s favor, and all the rumors and exaggerations over the past week have been precisely about this. Washington is said to be seeking some sort of informal agreement with Iran since the 2015 nuclear deal is now dead. The only way forward is an informal deal that amounts to a cease-fire on the nuclear front, a halting of drone supplies to Russia, and attacks on U.S. installations and personnel in Syria and Iraq–all of which Tehran continues to intensify in order to buy leverage for some easing of sanctions.  (Of all of this, we would keep a close watch on Iranian machinations in Syria, where Tehran is said to be setting up military storage facilities that would enable regional weapons transfers.)