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Takeaway: We think the Iran nuclear deal and US waivers of oil sanctions are on life support.

2018 Marks End of Iran Nuclear Deal & Start of US Oil Sanctions - zxo

Strong likelihood Trump denies waiver on Iran oil sanctions on Jan 12 or Later in May. Catalyst for US sanctions on 1 M b/d of Iran crude exports.

Jittery oil markets are awaiting President Trump’s decision whether waive US sanctions on Iran’s oil exports by a January 12 statutory deadline.

We think there is a strong likelihood that Trump will not waive sanctions again. Some of his foreign policy advisers and allies in Congress are urging him to give more time for a legislative fix to the Iran nuclear deal citing new momentum. But this new legislative momentum seems to have lost momentum over the last week.

The real question is how much patience does Trump have for a lack of progress in Congress or in diplomatic circles to fix flaws in a deal that he called “terrible” in a January 1st tweet.

Even if Trump is persuaded to issue another waiver on January 12 to provide more time for a solution, we think there is almost no chance he will issue another waiver again when the next deadline arrives on May 12.  Based on the record to date, it seems unlikely that Congress will take any action to pass legislation or that our EU partners will address any of Trump’s concerns about the deal. As a result, we think 2018 marks the start of US sanctions on Iran oil sales and likely the end of the Iran Nuclear Deal.

In our view, the protests that began in late December increase the odds that Trump doesn't waive sanctions again and make it hard to keep the status quo US policy on Iran as the January 12 date approaches. 

Separate from the January 12 waiver decision, Trump will also likely decertify the deal again on the January 13 deadline (every 90 days).  This is not a surprise but wouldn’t have any real impact on sanctions. It would however restart the legislative clock again for a legislative fix and potentially offer public relations value to slam the regime amidst the protests.  If he goes this route, it would set up a real showdown for the next sanctions waiver deadline in May.

While we are not sure Trump is patient enough to allow another two months for the “terrible deal” to be fixed, we are quite certain he will not agree to waive sanctions again without a fix when the next waiver deadline arrives on May 12. Another decertification on January 13 may be the last chance to salvage the Iran deal.

But we think the Iran nuclear deal and US waivers of oil sanctions are on life support.