The President of France Emmanuel Macron will have the honor of the first state visit of the Trump Administration, a sign of how Trump views his close relationship with his European counterpart.
Macron arrives in Washington today for a three-day visit. Many topics will be discussed but the number one priority is to persuade Trump not to reimpose US oil sanctions on Iran on May 12.
In an interview with Fox News Sunday, Macron said he will tell Trump that the Iran Deal must be preserved because “there is no Plan B.” Deal-maker Trump will appreciate the positioning of the EU but there is already a “Plan B” being developed to sway the US President. His message to Trump is keep the Iran deal but add other sanctions on Iran. But Macron is having trouble getting all EU members to sign on to the plan.
If there is anyone who can sway Trump, it is Macron. Of all the foreign leaders, Macron probably has the closest relationship with Trump. But we think this effort will come up short and is very unlikely to succeed.
Trump has seen this movie before. In January he was convinced to issue the oil sanctions waiver after being promised that Congress would pass tough new legislation and the EU would impose additional sanctions. As we predicted in January, neither has happened. Now, just three weeks before the next deadline on May 12, the EU is at it again telling Trump that Iran action is on its way and asking for more time.
As we have said in previous notes, we believe 2018 marks the end of the Iran deal and Trump will reimpose US oil sanctions on Iran. The EU will not initially go along but if Iran resumes its nuclear program, they will likely reconsider.
Trump’s decision will have major implications for oil markets and likely push prices higher. Since sanctions were lifted in 2016, Iran has added about one million barrels per day to global oil markets. Europe alone imports about 500,000 barrels a day from Iran which in our view will be the first to go as European energy companies will not want to cross US sanctions. However we believe others will soon follow, and as a result, closer to one million barrels of Iranian oil will be removed from global markets.