Nuclear Issues

Secretary of State Mike Pompeo’s most recent announcement on Iran policy has raised some eyebrows. He indicated on Monday morning that the Trump administration will not renew waivers to importers of Iranian crude and that other suppliers (meaning Saudi Arabia) have agreed to increase production in to ensure the global oil market remains well-supplied. Skeptics question whether — after last summer’s debacle — there is sufficient trust between Washington and Riyadh for this arrangement to work. What skeptics may not have digested is that, while timing remains a problem, this is a classic win-win situation. It is a near-perfect example of the very limited universe of occasions when transactional diplomacy could actually work.

After a tumultuous week of unpredictable twists and turns during President Donald Trump’s visit to Europe, anxiety levels have risen among experts and policy makers about the coming summit between Trump and President Vladimir Putin. As President Trump himself has noted, there is no shortage of issues demanding the attention of the two leaders: Syria, Iran, arms control and — who knows — maybe even Russia’s interference in America’s elections. But energy could snake its way onto the agenda, and Trump needs to be careful not to give Putin concessions in exchange for something the Russian president already plans on doing.

The world was in suspense a week ago wondering whether OPEC and non-OPEC producers would put more oil on tightening global markets. Turns out: Yes, they will. But, as the story does not end here, it is worth assessing where we are and how we got here. While the U.S. seems to have gotten what it wanted, it is not all good news.

Oil markets have so far reacted to President Donald Trump’s decision to withdraw from the 2015 Iran nuclear deal without either enthusiasm or panic — without even much apparent interest. There are many good reasons for this, but also many reasons to think oil markets’ complacency could change. Fortunately, the Obama-era sanctions that Trump has moved to reimpose have some lesser-known safety valves should oil markets later overheat as a result of the Iran decision.

Britain, France, and Germany's outreach to Trump has increasingly put them in a position where they will likely be blamed by all sides in case the nuclear deal collapses.

"...Iran's turn toward China and Russia leave the United States with less leverage for future negotiations on any issue, making it less and less likely for Iran to agree to cooperate with the United States or its allies. Thus, it is crucial to rethink these policies and come up with a more feasible plan."

"Although this phased-approach to sanctions relief under the JCPOA ensures that Iran does not receive benefits without first implementing its nuclear commitments, uncertainties remain. The agreement does not affect U.S. and EU non-nuclear sanctions, such as those that target human rights abuses, support for terrorism, and money laundering. One question is whether or not relief from nuclear-related sanctions will affect the usefulness of non-nuclear sanctions."

The latest Iran sanctions came into full effect this week, adding to a byzantine array of unilateral and multilateral measures that prohibit Iranian oil imports, other trade and financial transactions, and freeze Iranian assets by countries concerned that Tehran's nuclear program is intended for military purposes, not civilian ones.