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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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Has Iran Massively Underestimated Joe Biden?

Iran has been waiting since former U.S. President, Donald Trump, unilaterally pulled his country out of the Joint Comprehensive Plan of Action (JCPOA) in May 2018 and then re-imposed sanctions on Iran, for him to leave office and then to try its hand against a perceived weaker Democrat opponent. In fact, according to John Bolton, the former U.S. National Security Advisor under Trump, it was former Secretary of State, John Kerry, who - in 2018, after the U.S. announced is withdrawal from the JCPOA - advised Iran to stay in the nuclear deal and just wait it out until Trump was no longer president. Iran did precisely what Kerry advised and it is little wonder that Tehran is now engaged on dramatically upping the pressure on the new Democrat President, Joe Biden, with the intention of forcing the U.S. back into a broadly unchanged JCPOA deal and rescinding all sanctions against Iran. However, Tehran may well have miscalculated how Biden will react to this pressure.

Since the result of the last U.S. president election, Iran has been busy building an inflated negotiating position from which it can offer easy compromises when talks resume with the U.S. on Washington re-engaging in the JCPOA and ending sanctions. “Basically, Iran has looked at announcing a series of apparently highly dangerous-sounding moves in the run-up to Biden taking power but in reality these moves can be rolled back very quickly with no true damage done and were always intended to be traded in for the right terms, which would be no change to the JCPOA deal version agreed by [former U.S. President Barack Obama],” a senior Iranian oil and gas industry source told OilPrice.com last week. 

One of these recent moves was the seizure last week by Iran’s Islamic Revolutionary Guard Corps (IRGC) and subsequent removal to an Iranian port between Qeshm and Larak Island of a South Korean oil tanker (later identified as the 20,000 metric ton Hankuk Chemi) under the pretext of the vessel being responsible for ‘oil pollution’. The reality underpinning the seizure was fourfold, according to the source. First, it was the one-year anniversary of the assassination by U.S. elements of Major General Qassem Soleimani, Iran’s star geopolitical strategic thinker and commander of the IRGC’s elite al Quds (‘Jerusalem’) Force. Second, South Korea is a key ally of the U.S. in the Asia Pacific region, over which Iran’s key superpower sponsor, China, is looking to assert complete sovereignty. Third, according to Iran, South Korea owes the Islamic Republic almost US$7 billion of oil revenues, so it is ‘fair game’. And finally, by re-asserting its willingness to hijack vessels in and around the Persian Gulf, Iran highlights to Biden that the narrow and vulnerable waterway of the Persian Gulf’s Strait of Hormuz – through which flows around one third of all of the world’s oil supplies – is part of the Islamic Republic’s perceived backyard. As an adjunct to this, Iran is signalling that it can cause mayhem in the world oil markets at will with future seizures whilst at the same time not having its own oil exports affected because of the game-changing Goreh-Jask pipeline that by-passes the Persian Gulf entirely. Related: India Oil Demand Falls For First Time In 20 Years Due To COVID

More seriously as far as global implications are concerned are the carefully-publicised comments from various Iranian officials about the level of Iran’s uranium enrichment program. According to Iran’s Foreign Minister, Javad Zarif, last week, Iran has restarted 20 per cent uranium enrichment at its underground Fordow nuclear facility, agreed by its parliament and notified to the International Atomic Energy Agency (IAEA). This is in non-compliance with the terms of the JCPOA, as initially agreed in 2015 and then formally implemented on 16 January 2016. Pointedly, and in complete alignment with the post-John Kerry-advice policy of Iran, Zarif added: “Our measures are fully reversible upon full compliance [with the JCPOA] by all.” In this context, Iran has always maintained that before the U.S. unilaterally withdrew from the JCPOA in May 2018 it had never broken the uranium enrichment levels agreed in the deal. Iran’s assertion was backed up by the IAEA and was a key reason why the enormous pressure for a major military attack on Iran during Trump’s presidency – mainly from John Bolton and his allies, and especially after Iran downed a U.S. drone in June 2019 – did not go ahead.

On the one hand, senior political sources in Washington exclusively highlighted to OilPrice.com at the time, those advocating such an attack stressed that Iran’s shadowy Organization of Defensive Innovation and Research (‘SPND’ initialism in Farsi) - working together with the IRGC - had become expert in continuing its nuclear weapons research under the cover of a range of quickly-changing front companies. These can operate unhindered in the international business community by pretending that they are engaged in legitimate non-sanctioned business activity, including accessing traditional finance, credit and banking facilities. Related: Why Asian LNG Prices Are Going Through The Roof

On the other hand, a number of very senior personal advisers to Trump, and some of the most senior figures in the Central Intelligence Agency (CIA) – testified to a Senate Committee prior to the withdrawal of the U.S from the JCPOA that there was no indication that Iran was attempting to develop a nuclear weapon and that Tehran remained in compliance with the 2015 nuclear deal. This view was apparently even shared by the CIA Head of Iran Mission Center, Michael D’Andrea, known as ‘the Dark Prince’ for his work in the U.S.’s sharp-end counter-terrorism operations after the ‘9/11’ attacks. He was reportedly even the key figure in organising the elimination of one of Hezbollah’s leaders, Imad Mougniyeh, in Damascus, in 2008, when D’Andrea was Head of the CIA’s Counterterrorism Center (from 2006) - an operation that looked remarkably similar to the later assassination of Soleimani.

Will this pressure from Iran work on forcing Biden back to an unchanged 2015/16-version of the JCPOA? OilPrice.com understands from sources close to the new Administration that a number of the key members of the team that negotiated the original JCPOA deal with Iran – which included virtually all of the tougher clauses that were then dropped by former President Barack Obama in his rush to sign the deal in 2015 - will be returning to the Biden negotiating team. These clauses that were dropped by Obama were the very same clauses that were later laid out by then-Secretary of State Mike Pompeo after the U.S. withdrew from the deal in 2018 as being essential for any deal being made under Trump. These original, tougher clauses are going to form the basis of the Biden Administration’s renegotiation of the JCPOA with Iran and, unlike last time, both France and Germany are now behind the key clause of these that is designed to check Iran’s ballistic missile program, along with the E.U. formally as a whole.

The core concepts - plus the 12 specific tough clauses - that will form the basis of the renegotiation of the JCPOA by the Biden team, are exclusively laid out in this earlier article by OilPrice.com to be found by clicking this link here. This article also exclusively lays out the likely Iranian reaction to these clauses and the likely U.S. response to this reaction. Biden’s attitude to China’s involvement in Iran – primarily different from Trump’s in that it will not ever “give up security considerations for trade” as Trump frequently did – is to be found here.

By Simon Watkins for Oilprice.com

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  • Mamdouh Salameh on January 12 2021 said:
    It was a democratic American president who negotiated the 2015 Iran nuclear deal. President-elect Joe Biden was then his Vice President. So it was a reasonable bet on the part of the Iranian leadership to expect from President-elect Biden a less aggressive approach than Trump’s and less servitude to Israel.

    Iran made it clear from the start that that it will neither agree to any limits on its nuclear and ballistic missile development programmes nor will it negotiate with President Biden without a lifting of US sanctions first or at least a significant easing of the sanctions. This is something President-elect Biden will find difficult to accept and this is the crux of the matter. That is why US sanctions on Iran will continue well into the future.

    On the other hand, one has to consider the possibility that Iran might not be interested in a new deal with the Biden administration. The reason is that by their own admission, Iran’s leaders have been saying that Iran has mastered the art of minimizing and evading the intrusive US sanctions that were supposed to cripple Iran’s crude oil exports and its economy. The Iranians let it be known that they have managed to raise their crude oil exports to 1.5 million barrels a day (mbd) or 71% of pre-sanction level through open exports to countries that defied US sanctions like China, India and Turkey, ship-to-ship transfer, as part of Iraqi oil exports and also through barter trade. Furthermore, Iran has a major trump card. Iran considers the highly important Strait of Hormuz as part of its backyard thus implying that it could block it or close it at will having secured for itself the Goreh-Jask oil pipeline that by-passes the Strait entirely.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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