Why Iran May Not Be Open To Negotiation
July 17, 2019 2:41 pmVideo
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The price of crude oil tanked by
more than 4% yesterday after US Secretary of the State, Mike Pompeo said that
Iran had approached the US for talks. He did not share more details on this but
it came a day when the Iranian Foreign Minister, Javad Zarif was in the United
States. This was interpreted to mean that he was the conveyor of the news from
the Iranian president.
Iran and the United States have
been at loggerheads for the past one year after the US exited the Joint
Comprehensive Plan of Action (JCPOA). This was a comprehensive deal that was
negotiated in a period of more than ten years. In the end, Iran pledged not to
continue pursuing the development of the nuclear weapons on the condition that
all sanctions were lifted.
The deal was announced in 2015,
at the height of the US election campaign. With the divisions between the
democrats and the republicans, the latter moved to oppose the deal. The issue
was exacerbated when an aircraft carrying millions of dollars in cash was seen
being offloaded in Tehran. These were Iranian funds that were held in the US when
the sanctions kicked in. This became a major talking point among the
conservatives.
Last year, Donald Trump announced
that the US was leaving the nuclear deal. It is well known that the president
had not read the deal and the details that were put in place. In his statement,
he said that Iran was uncompliant, even though independent agencies found that
it was complying. He also said that the deal did not address the Iranian
missile program and its sponsoring of terrorism.
Iran has always accused the west
for these claims. On the missiles program, Iran argues that they are there for
national security reasons. It argues that it has to have the missiles to
protect itself against Israel, which is an American ally known for having
hundreds of nuclear weapons.
Today, Iran is one of the most
sanctioned country in the world after North Korea. This has seen its economy
suffer and the unemployment rate increase to 12.8%. The country’s oil exports
have declined from more than 2.5 million barrels a day to just over 200k. The
anxiety in the country has increased too.
Therefore, the news that Iran and
the US were close to talks was received well by the market. However, this meant
that the price of crude oil had to drop because Iran has insisted that the
talks will only happen if the US removes the sanctions that have been in place.
However, traders should be
careful because the negotiation issue is still in its infancy. There are three
reasons for this. First, Iran has said that the missile program is not
negotiable. This could be a turn-off to the US. Second, there is no mutual
respect between the two sides. Third, if there will be talks, they will likely
take months to conclude. Therefore, there is a likelihood that the price of
crude could resume the upward trend.
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