On the day Iran’s President Hassan Rouhani was re-elected to another term, President Trump had departed Washington on his first foreign trip as President to Riyadh for talks with King Salman and others in the anti-Iran coalition.
The Iran nuclear deal dodged a bullet with Rouhani’s reelection over hardliners opposed to the deal. But one cannot dismiss the significance that President Trump, the most prominent critic of the Iran deal, chose Saudi Arabia as the first country to visit on his inaugural foreign trip.
In addition to the sword-dance, the Saudi’s did not disappoint the moment as was clearly evident in the President’s reaction and words in Riyadh. “I want to thank King Salman for his extraordinary words and the magnificent Kingdom of Saudi Arabia for hosting today’s summit,” said Trump. “Words do not do justice to the grandeur of this remarkable place and the incredible hospitality you have shown us from the moment we arrived.”
Trump then announced a $110 billion military weapons sales deal with Saudi Arabia that the White House said will translate into more American jobs.
In his speech to the first Arab Islamic American Summit, Trump specifically called out Iran as “a regime that is responsible for so much instability in the region.” Trump continued “All nations of conscience must work together to isolate Iran, deny it funding for terrorism and pray for the day when the Iranian people have the just and righteous government they deserve.”
In a joint US-Saudi statement issued after the visit, Iran and the nuclear deal received special attention: “The two leaders also stressed that Iran’s interference poses a threat to the security of the region and the world, and that the nuclear agreement with Iran needs to be re-examined in some of its clauses. The Iranian ballistic missile program poses a threat, not only to neighboring countries, but also a direct threat to the security of all countries in the region as well as global security.”
After Riyadh, the President flew to Israel for talks that no doubt also included concern about Iran and the nuclear deal itself.
While the conventional wisdom in the foreign policy community in Washington is that the Iran nuclear deal will survive under the Trump Administration, our contacts in the White House tell us the future of the Iran deal is hardly a settled point.
In April, President Trump ordered a review of the policy, and Secretary of State Tillerson reiterated during the Middle East trip that the Iran nuclear deal is still “under review” by the administration.
Some have pointed out the Administration had recently granted waivers in compliance with the Iran deal but the White House has made clear that such action should not be viewed as a signal of future policy regarding Iran.
During a background briefing for reporters, a State Department official explained: “the Trump administration is currently conducting a comprehensive review of our Iran policy. Once we have finalized our conclusions, we will meet the challenges Iran poses with clarity and conviction. We have made clear that at least until this review is completed, we will adhere to the JCPOA and will ensure that Iran is held strictly accountable to its requirements.”
The President himself has been less diplomatic about the JCPOA, calling it the “worst deal ever”.
For oil markets, the increasing anti-Iran rhetoric and a closer US-Saudi alliance, pose a higher risk to the Iran nuclear deal that lifted sanctions and added about 1 million barrels a day (b/d) of Iranian crude exports to global markets.
If the US were to walk away from the deal and reimpose nuclear sanctions, Iranian crude exports of nearly 1 million b/d would likely be removed from the market and thus spike oil prices. While EU governments may not go along with a unilateral US action to reimpose sanctions, European energy companies with increasing US economic exposure would not risk violating US sanctions. Most of the new Iranian crude exports have been sold to Europe but the US would lean hard on South Korea and Japan to also honor the sanctions. Renewed US sanctions would have the effect of global sanctions.
Iran’s action on ballistic missile testing is also causing deep concern in the Congress about the need for future sanctions. On Thursday, the normally cool-headed Senate Foreign Relations Committee passed bipartisan legislation to expand sanctions on Iran for ballistic missile development. For now, some in Congress are trying to keep separate the ballistic missile issues from the nuclear deal but that will become increasingly difficult on the current path.
This week, a top commander in Iran’s Revolutionary Guards told the Fars news agency that Iran had built a third underground ballistic missile production facility and “we will continue to further develop our missile capabilities forcefully.”
The Iranian election itself could still have repercussions for the nuclear deal. While their Presidential candidate was not successful, the Revolutionary Guards and other hardliners may continue to exert influence and take actions that undermine the détente with the west. Examples would include continued Iranian trouble-making in the region or further Iranian navy encounters with US Navy or other ships that could present more catalysts for a Trump rejection of the nuclear deal and/or additional sanctions.
