By Rashmi Kumar
Although the US officially remains part of the landmark 2015 Joint Comprehensive Plan of Action, Trump did not confirm that Iran was compliant with the agreement. This now throws open the possibility of sanctions again Iran, a decision the US congress must make within 60 days, setting the stage for an “entirely unpredictable result”, Jonathan Lemco, principal and senior analyst at Vanguard Group, told GlobalMarkets. Trump’s move comes even as many of the US’s allies — and even many in the president’s administration — have said that Iran, led by moderate president Hassan Rouhani, is in technical compliance with the deal.
His decision opens a can of worms as the US simultaneously deals with another nuclear threat, from North Korea. “The North Korea story is a very important one to watch because the US decision on Iran can have a proliferation impact,” Helima Croft,
global head of commodity strategy at RBC Capital Markets, told GlobalMarkets.
“That’s why many Republicans were uncomfortable getting out of the Iranian deal. With this decision from the US, how do you negotiate with a country like North Korea? How will you pressure them to give up their nuclear weapons if the US did not certify Iran’s nuclear agreement?”
North Korea threat
North Korean leader Kim Jong Un and the US have exchanged heated words in recent months with the former threatening an
outright attack and testing missiles.
Trump’s stance on Iran, which has effectively paved the way for the US to kill the nuclear agreement, is less about the details of the accord and more about taking a stab at Iran’s foreign policy stance, reckons Lemco.
Whatever the rationale, the consequences will be significant, especially as many European countries have hit back at Trump’s take. While a trade war between the US and Europe over Iran is rather unlikely, Iran is trying to play that card, said Croft.
“At a minimum these sanctions will likely impose strains in US-EU relations as the White House is intent on trying to force foreign corporates to choose between doing business with the US and Iran.” Experts also warned about the possible effect on the ommodities market, particularly oil. Asian economies such as India and South Korea are among Iran’s biggest crude oil buyers, meaning potential US sanctions on Iran could increase demand from other producers.
Blaise Antin, managing director, sovereign group head, at asset manager TCW, said: “Once the US signs on to something it sticks to it. But what we are seeing now is unchartered waters with the US. That affects the behaviour of everyone from North Korea to others doing business every day.”