Hidden beneath the (understandable) attention now devoted to China tariffs is the looming May 12th “Last Chance” President Trump has given Iran and the P5 + 1 signatories to fix the Nuclear deal (JCPOA). At this point, few if any believe this will end well - i.e., with Trump rolling over sanctions relief yet again and the U.S. staying in the deal.
- French President Emmanuel Macron is leading an effort to come up with a coordinated European signatory (France, UK and Germany) position that might placate Trump - on Iranian missile testing, further sanctions, agreements on so-called JCPOA “sunset provisions.” The problem: this might reflect progress, at least with our European friends – but not with China, Russia or Iran!
- And even IF such a Macron-led agreement could be hammered out before May 12, it won’t sway Trump; he – plus Secretary of State-designate Mike Pompeo and new National Security Advisor John Bolton – all seem committed to backing us out of the deal.
The question then – what does Iran do?
- There is an optimistic scenario: that Europe, forced to choose between the U.S. and Iran, will stay in the deal because of continued business attractiveness of the Iranian Republic; Iran therefore abides by the nuclear terms of the deal, at least for the near-term.
- But this is likely too rosy by a half. IF Trump takes the U.S. out of the JCPOA, the U.S. will in all likelihood impose such heavy financial penalties on any western company or country that continues to do business with Iran that it will cast a pall over all potential business transactions with Tehran; Iran then concludes, “why stay in this thing?”
- China and Russia couldn’t care less; they'll keep dealing with Iran for their own self-interest; but the deal collapses and Iran inches back up the nuclear ladder – stopping short of full-up weapons capability. And we are back to where we were in 2015!
In light of the Iranian protests last December and January (that extended into the rural areas of Iran at the heart of Revolutionary Guard/militia recruiting), one might logically ask: does the regime even survive? Quick answer: Yes. President Rouhani might be “forward leaning” on reforming the economy – but he has no strategy; and he is currently “auditioning” to be the next Supreme Leader.
- Further, the current regime has an excellent track record of jailing or executing any opposition leader who poses a threat. Even though smartphone use in Iran has increased by a factor of 50 since the last major protests in 2009 (from one million to 48 million), as Tom Friedman says, “Bang Bang” beats “Tweet Tweet!”
BOTTOM LINE: Not a pretty scenario. Iran has been largely “below the radar” for months; in a few weeks, however, the “Tehran radar visibility” will be magnified considerably – all this a near-term nuclear problem of our own making.
